Gas theft: Provinces to pocket Rs33b after UFG ceiling reversal

Federal govt in fix on how to save gas companies from bankruptcy.

ISLAMABAD:

Following a revision in the ceiling of unaccounted for gas (UFG), provinces are to receive Rs33 billion by squeezing money from the gas utilities, a move which will hit the federal government and possibly lead to the bankruptcy of gas companies.

Sources in the petroleum ministry told The Express Tribune that the National Accountability Bureau (NAB) has put the federal government in jeopardy.

Previously, Oil and Gas Regulatory Authority (Ogra) had decided to raise the UFG ceiling from 5% to 7%, enabling gas utilities like Sui Northern Gas Pipeline Company (SNGPL) and Sui Southern Gas Company (SSGC) to pocket Rs44 billion during the three-year period.

Now, the Lahore High Court (LHC) has reversed the ceiling to 5%, and Ogra will have to make adjustments in the accounts of gas utilities to recover the Rs44 billion which went into the federal treasury, being a major shareholder of the gas companies.

Earlier, Ogra had planned to get the money back from gas companies over a three-year period but SNGPL and SSGC informed the regulator that it could not make the adjustment in three years according to audit rules. Now, while giving its decision on revenue requirement of gas companies for the year 2013-14, Ogra is to make adjustments in the accounts of these gas companies by recovering Rs33 billion, leaving the federal government in a fix.

Sources said that after accounts adjustment, an amount of Rs33 billion will go to the provinces on account of gas development surcharge (GDS).

“The federal government will either have to give bailout packages to these companies to pay this amount to the provinces or the companies will go bankrupt,” sources said, adding that the government had already made a commitment with the International Monetary Fund (IMF) to not give any bailout package.

Sources maintained that the consumers will also not benefit from this adjustment as NAB had said that the raise in UFG ceiling was a loss of GDS, and the federal government will be paying it.

The Lahore High Court (LHC) has also dismissed a petition filed by SNGPL to maintain the UFG at 7%.

The total financial impact of the court’s stay order on SNGPL for the financial years 2010-2011, 2011-2012 and 2012-2013 was Rs23.1 billion. Out of this amount, Rs9.34 billion has already been adjusted based on the dismissal of the order by LHC.

In the case of SSGC, officials said the amount is Rs21.74 billion. It is interesting to note that NAB had also filed references against heads of those companies which obtained the stay order against lowering the ceiling of UFG.

Regarding the UFG ceiling, LHC observed that Ogra had raised the ceiling for gas companies for 2009-2010 as a one-time relief. The ceiling was raised from 5% to 7% after the government revised the consumer cost criterion for extension of gas schemes to new districts, towns and villages in July 2008.

The government had revised the per consumer cost in Punjab and Sindh from Rs20,000 to Rs54,000, Rs40,000 to Rs108,000 in Khyber-Pakhtunkhwa and Rs100,000 to Rs270,000 in Balochistan.

The court observed that the controversy regarding UFG started with the determination for the period 2009-2010. At that time, the UFG ceiling was set at 7% for SNGPL which was a one-time determination deviating from the given benchmarks. “There is nothing on record to show that respondent number 1 (Ogra) has acted unfairly, unreasonably or contrary to the law and principles of justice,” LHC observed, before dismissing the petition.

Published in The Express Tribune, February 16^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.