ECC flags poor governance in gas utilities

FinMin says board directors should play role in improving performance of companies

ISLAMABAD:

The country's economic managers have voiced concerns over the performance of boards of directors of gas utilities and have called for improving governance to ensure effective management.

Successive governments have appointed boards of directors on political grounds, rather than bringing in qualified experts to suggest measures for improvement in governance. Due to such appointments, the utilities have faced governance issues. Gas companies are incurring high losses, which are eating up billions of rupees.

The Oil and Gas Regulatory Authority (Ogra) has permitted higher system losses to be passed on to gas consumers, while persistent leakages and theft have sparked concerns among the economic managers.

These issues were taken up in a recent meeting of the Economic Coordination Committee (ECC), held to consider proposed hikes in gas prices across various consumer categories.

During the meeting, ECC Chairman and Finance Minister Muhammad Aurangzeb raised the issue of governance in boards of Sui gas companies. He said that the directors serving on boards should play their role in bringing about improvement in the utilities.

The petroleum minister briefed the economic decision-making body that Pakistan had committed to reducing circular debt under the International Monetary Fund (IMF) programme. He stated that an increase in gas tariffs was necessary to reduce the quantum of debt.

He apprised the ECC that for domestic consumers, only fixed charges had been proposed to be increased, while gas tariff would remain the same. The higher fixed charges, it was observed, would not affect the consumption behaviour of users.

The forum was informed that the first portion of recovery would be made immediately, so that a sound financial footing could be ensured. For List C, a subsidy should be considered.

The Petroleum Division sought permission to submit a revised summary on gas prices, prepared in light of recommendations of a committee constituted by the Prime Minister's Office. Based on the recommendations of the committee, the division submitted the following proposals for consideration of the ECC.

It recommended the approval of tariff revisions proposed for domestic slabs and other categories. Also, Ogra should be advised to consider revenue surplus, if available, for meeting prior year shortfalls/circular debt at the time of finalising the estimated revenue requirements.

The Petroleum Division recommended that Ogra should be advised to allow companies to carry forward the revenue deficits arising at the time of final revenue requirements in the next revenue determination, as per provisions of the Natural Gas Tariff Regime 2018.

It asked the committee to direct Ogra and the Cabinet Division to make amendments in the Ogra Ordinance 2002 for quarterly tariff adjustments to ensure timely recoveries before the next biannual determination in December 2025. It requested the ECC to approve the proposals. The ECC considered the summary titled "Natural Gas Sale Pricing FY 2025-26 (Effective July 1, 2025)" and approved the proposals.