Gas companies seek tariff increase to finance development schemes

Ogra to conduct public hearing before taking a decision.

Zafar Bhutta August 13, 2011


Following a recent rise in gas prices by 13.55 per cent, people should be ready to face another blow as Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) have sought an increase of up to seven per cent in gas tariffs, which will be passed on to consumers with effect from July 1.

The Oil and Gas Regulatory Authority (Ogra) will conduct a public hearing in connection with the review petitions filed by SNGPL and SSGC on August 22 and 23 respectively to listen to the views of stakeholders. If Ogra gives a decision in favour of gas utilities, consumers will be facing a tariff increase of over 20 per cent in six months from July to December 2011.

However, All Pakistan CNG Association has rejected the tariff increase sought by gas companies to generate funds for new development projects at a time of acute shortage of gas in the country. It termed the demand ‘unjust and unfair’.

According to the petitions submitted by the gas companies, funds generated by the tariff hike will be used to expand the pipeline network to new towns and villages, for purchase of vehicles, plant and machinery and vehicle insurance.

The SNGPL has sought a tariff increase of Rs22.48 per mmbtu (seven per cent) effective July 1 to meet a revenue shortfall of Rs13.65 billion in financial year 2011-12. Earlier, the company had sought an increase of Rs47.98 per million British thermal unit (mmbtu) in prescribed gas prices for 2011-12 to meet a revenue shortfall of Rs29.14 billion.

In its determination on May 24, Ogra saw a revenue shortfall of Rs4.58 billion and set tariff increase at Rs7.54 per mmbtu. Later on the intervention of the Ministry of Petroleum, the tariff increase was revised upwards to Rs11.02 per mmbtu.

However, the company still had reservations about Ogra’s decision and it filed a review petition, seeking further tariff increase to generate revenue to meet expenses on transmission lines, distribution network, completion of ongoing projects for new towns and villages and purchase of plant and machinery.

SSGC, in its review petition, has sought a tariff increase of Rs2.35 per mmbtu to generate Rs930 million in revenues, sources said.

Earlier, the company had requested an increase of Rs49.66 per mmbtu to meet the revenue requirement of Rs19.68 billion in financial year 2011-12. In response, Ogra allowed a price increase of Rs5.08 per mmbtu, but later on the advice of federal government, it revised it upwards to Rs22.06 per mmbtu to generate Rs8.74 billion.

Gas utilities have sought the tariff increase to finance parliamentarians’ schemes in their respective constituencies, which is a violation of rules and that too at a time when the companies have failed to provide gas to existing consumers. According to rules, gas utilities cannot launch new schemes if they have failed to provide gas to existing consumers.

“The expansion of the distribution network will also curtail gas supply to consumers, which will lead to economic distortion,” a source said.

In its earlier decision, Ogra had linked initiating work on new schemes with fresh discoveries of gas.

Published in The Express Tribune, August 14th, 2011.


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