OGRA right in dismissing demands for higher UFG

Companies should make supply systems more efficient.

ISLAMABAD: The Consumer Rights Commission of Pakistan (CRCP) had taken serious notice of the federal cabinet’s decision regarding an increase in tariff of Rs13 per unit and to pass on Rs11 billion as the financial impact of gas theft on to consumers purely due to the inefficiency of distribution companies. The Oil and Gas Regulatory Authority (Ogra) has taken the right stand by refusing to implement the cabinet’s decision and passing on that burden to bill-paying consumers.

While analysing the issue, CRCP experts had strongly opposed a further increase in the gas tariff and had asked authorities to eliminate power theft and collect bills from defaulters instead of passing on hefty losses to gas consumers which are already overburdened.

Gas theft is on the rise, as it has surged to 380 million cubic feet per day (mmcfd) – 200 mmcfd from Sui Northern Gas Pipelines (SNGPL) and 180 mmcfd from Sui-Southern Gas Company (SSGC) systems. The Ministry of Petroleum and Natural Resources has announced that gas is being illegally utilised by all consumers, including industrial, commercial and domestic users.

Gas theft in Pakistan burns up about 12.5% of total production. This unaccounted for gas (UFG) is usually the difference between the total volume of gas purchased by distribution companies and the volume of metered gas supplied to consumers. UFG levels of SSGC and SNGPL have remained abnormally high, above over 10% last fiscal year. The international benchmark of UFG for companies is 2%. According to Ogra estimates, 1% of UFG of both companies at an average price of gas in fiscal year 2011-12 translated to a revenue loss of Rs3.23 billion per year. These losses reflect gas companies’ performance and adds to the cost of gas for consumers.



Pakistan is going through what many describe as an existential crisis. Almost everyone agrees that the most fundamental and significant reason underlying this crisis is the inequities and injustices that have been prevalent in the country. The situation demands a collective effort on the part of all stakeholders of society, including civil society and citizens, policy and decision makers, scientists and academia, industrialists, entrepreneurs and the government.

CRCP has suggested that the government take alternative measures instead of increasing tariffs to bear the cost of the restructuring process in the gas sector. It has appreciated the government initiative to restructure the gas sector for long-term benefits, but this should not be done at the cost of consumers who are already paying for the inefficiencies of the gas sector.

THE WRITER IS A PROJECT MANAGER AT THE CONSUMER RIGHTS COMMISSION OF PAKISTAN

Published in The Express Tribune, February 25^th, 2013.

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