The Economic Coordination Committee (ECC) of the cabinet, slated to meet on Saturday, is likely to approve policy guidelines on determining revenue requirements of gas distribution companies in an attempt to pass the burden of Rs49 billion on to consumers.
This amount has been stuck with the distribution companies – Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) – since the day they obtained stay orders from courts following reversal of the increase in unaccounted-for-gas (UFG) ceiling from 5% to 7%.
The Oil and Gas Regulatory Authority (Ogra), headed by Tauqir Sadiq at that time, had raised the UFG ceiling – covering gas theft and leakage – for 2009-10. However after one month, it rescinded the decision and set the ceiling again at 5%.
In a summary, the Ministry of Petroleum and Natural Resources told the ECC that after vacation of the stay order by the Lahore High Court, Ogra was bound to adjust Rs13 billion in revenue requirements of SNGPL for financial year 2010-11 and 2011-12. It would have to adjust another Rs8 billion in revenue requirements for 2012-13 with the cumulative impact estimated at Rs21 billion.
Similarly, if the Sindh High Court also vacated its stay order, total financial impact on SSGC would be Rs28 billion for the three financial years, the ministry said.
It feared that the gas utilities would become bankrupt if certain measures were not taken to pass the burden of Rs49 billion on to consumers.
It proposed that it should be allowed provisionally to consider the following as gas sales volumes for the purpose of calculating UFG benchmark. (i) Volume pilfered by unregistered consumers but detected and determined by the companies (ii) volume against minimum billing amount charged to domestic consumers (iii) volume consumed in law and order-stricken areas and (iv) impact of change in bulk-retail ratio for UFG using 2003-04 as base year when UFG ceiling stood at 6.5%.
CNG kits, cylinders
Apart from this, the apex economic decision-making body will take up a proposal of the Ministry of Petroleum that seeks to remove the ban on import of compressed natural gas (CNG) kits and cylinders despite acute gas shortages.
An Italian company is pushing the government to reverse the previous government’s restrictions on the import of CNG kits and cylinders.
In its summary, the ministry proposed that original equipment manufacturers – carmakers – may be allowed to import CNG cylinders, kits and parts for installation in vehicles at their manufacturing and assembly plants.
However, Ogra opposed the ministry’s plan, suggesting all stakeholders should be provided equal opportunities with no discrimination.
CNG policy guidelines
The ECC will also discuss new policy guidelines for the CNG filling stations. The government is planning to introduce the new guidelines that call for forming three regions for setting CNG prices in the country.
The ministry has proposed an increase in the operating cost of CNG stations but rejected the demand for pushing up their margins.
Published in The Express Tribune, July 3rd, 2014.
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