Govt decides to keep gas prices unchanged

Disregards Ogra’s order which had reduced gas prices by 6% from July 1

ISLAMABAD:

The government has decided to keep gas prices unchanged for the time being, despite the Oil and Gas Regulatory Authority’s (Ogra) decision to reduce gas prices by 6% with effect from July 1.

According to an earlier notification, Ogra had reduced the price of gas for the Sui Northern Gas Pipeline Limited (SNGPL) consumers by 6% and the Sui Southern Gas Company (SSGC) consumers by 5.68%.

Ogra made the decision after determining revenue requirement of the gas companies – the SSGC and the SNGPL – for fiscal year 2020-21 under Section 8(1) of its ordinance. 

It had sent the same to the petroleum division to determine gas price for each category of consumers under Section 8(3) of the ordinance. The petroleum division was bound to send back its advice to Ogra to notify sale prices of gas within 45 days of decision by Ogra.

“The petroleum division has sent its advice to Ogra to keep gas prices unchanged. The issue of gas would also be taken up in upcoming meeting of the Economic Coordination Committee (ECC) of the Cabinet,” a senior government official said.

He said the petroleum division would propose to the ECC to keep gas prices unchanged. “However, if there is any revision in gas prices, it would be effective from September 1 instead of July 1,” he added.

Officials said the regulator had decided to reduce gas prices up to 6 per cent for six months from July to December 2020 but the government has no options but to keep the prices unchanged as the gas utilities are facing revenue shortfall of Rs200 billion.

Officials said the gas companies are also to recover Rs73 billion on account of diverting imported gas towards the domestic gas consumers.  The ECC had approved in principle to recover it from the consumers. However, the cabinet had put this decision on hold fearing a political backlash.  

The SNGPL had demanded to increase the gas price to Rs1,287.19 per mmbtu against the existing price of Rs664.25 per mmbtu. However, the regulator decided to reduce the price to Rs623.31 per mmbtu, which is 94% less than demand and 6% less than existing price.

The SNGPL had sought revenue of Rs433 billion for the year 2020-21 but the regulator allowed Rs219 billion. The SNGPL had claimed to disallow Rs750 million on account of unaccounted-for gas (UFG) adjustment but the regulator allowed Rs7 billion.

The SSGC had demanded to raise the price to Rs881.53 per mmbtu against the existing Rs796.18 per mmbtu. However, Ogra reduced the price to Rs750.90 per mmbtu, which is 10.71% less than demand and 5.68% less than existing price.