Earlier, the government had raised gas prices by as much as 38.5% for consumers of both gas utilities in order to recover Rs77 billion. PHOTO: FILE
In what could spark another anti-populist move, Sui Northern Gas Pipeline Limited (SNGPL) has asked the Oil and Gas Regulatory Authority (Ogra) to increase gas prices, meant to pass on an additional burden of Rs82 billion to gas consumers from next year.
The request was put forward during a public hearing conducted by Ogra, which reserved its judgement.
SNGPL is seeking to implement policy guidelines issued to the regulator by the federal government to increase unaccounted for gas (UFG) to bail out gas companies.
In its petition, SNGPL has sought an increase of Rs196.84 billion per million British thermal unit (mmbtu) which would enable the gas utility to recover Rs82.9 billion from gas consumers. SNGPL officials have said that the final step of the decision is yet to be implemented due to the departure of former chairman Tauqeer Sadiq.
SNGPL had obtained a stay order to continue with 7% UFG, but it was vacated by the court. The current UFG allowed by the regulator is 4.5%. However, Sui Southern Gas Company is still getting 7% UFG due to stay orders.
Earlier, the government had raised gas prices by as much as 38.5% for consumers of both gas utilities - SNGPL and SSGC - in order to recover Rs77 billion from gas consumers.
Out of this, SNGPL’s share amounted to Rs47 billion, however, the company now aims to increase this to Rs82.2 billion from gas consumers from January 1, 2016 to meet its revenue shortfall.
Government’s wish
Through implementation of the guidelines, the federal government wants Ogra to add Rs13 billion to the revenue requirement of SNGPL for financial year 2010-11 and 2011-12. Similarly, it is required to add another Rs8 billion to the revenue requirement for 2012-13, with the cumulative impact standing at Rs21 billion.
The regulator has sought opinion from independent legal consultants to implement these policy guidelines, who have suggested that Ogra is not legally bound to follow directives of the federal government in relation to the collection of an additional Rs49 billion from consumers.
Following an increase in the UFG ceiling, which covers theft and leakage, from 5% to 7% by Ogra in 2010, then headed by Sadiq, the state-owned gas transmission and distribution firms had earned an additional revenue of Rs49 billion. The National Accountability Bureau (NAB), however, termed it a scam.
The Economic Coordination Committee (ECC) of the cabinet approved policy guidelines that forced the regulator to allow gas utilities - to collect the cost of gas theft from honest consumers who were regularly paying their bills. As a result, share prices of the two companies jumped at the local bourse.
“Ogra has legal powers to implement these guidelines, but the federal government cannot direct the regulator,” an official said, quoting the legal opinion received from the third-party consultants.
According to a senior government official, the socio-political programme of the government under which gas is provided to untapped villages has increased the ratio of retail consumers compared to bulk users. “This has caused an increase in the UFG level.”
Published in The Express Tribune, October 20th, 2015.
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