Ministry, Ogra at loggerheads on PSO margins on LNG

Regulator set to fix PSO margin at 2.5pc against demand of 4pc

ISLAMABAD: With the arrival of an LNG ship from Qatar, a new dispute between the government and the Oil and Gas Regulatory Authority (Ogra) is set to emerge within days on the issue of margins, administrative and operational charges of PSO, SSGC and SNGPL as the regulator has made up its mind to only increase the margin of PSO on import of LNG from 1.83 percent to 2.5 percent against a demand of 4 percent, which is unacceptable to the government.

The regulator has decided not to increase the administrative, operational charges of SSGC and SNGPL too, a senior official told The News.

The increase in the PSO margin from 1.83 percent to 2.5 percent is simply unacceptable as the four percent margin is rational, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said commenting on the development. He said the regulator should regulate the sector with a rational approach and not with an irrational approach.

This is why the Ministry of Petroleum and Natural Resources, the minister said, is going to pitch in the next meeting of Economic Coordination Committee (ECC) the summary seeking deregulation of LNG, putting aside the role of Ogra. In case the ECC accords approval to the summary, then the government will be able to timely pay the price of LNG ships.

Under the deal, Pakistan is needed to pay the price of LNG ship in 15 days’ time and it is possible only if the imported product gets deregulated.

The regulator earlier determined on October 7, 2015 the provisional RLNG price at $8.64 per MMBTU by fixing the PSO margin at 1.83 percent (out of which 1.3 percent goes to the FBR in the form of tax and the remaining 0.5 percent was the margin left to PSO).

Ogra had also cut the retainage (loss during re-gassification) at 0.75pc instead of 1.5pc demanded by the ministry and disallowed infrastructure cess on the RLNG imposed by the Sindh government while setting the provisional price.

After that PSO and gas companies summited their petitions to Ogra, seeking an increase in their margins and restoration of administrative and operational charges. Three hearings were conducted in various parts of the country. Now, Ogra has decided to increase the PSO margin up to 2.25 to 2.5 percent from 1.83 percent. This has irked the minister of petroleum and natural resources. The minister says the expense on opening the LC and other import related issues cannot be covered with the margin of 2.5 percent.

Under the existing provisional determination, the RLNG price for end consumers stands at $6.66 per unit and PSO is getting 1.83 percent meaning it is getting Rs8.86 per MMBTU from consumers in the shape of margin and if it gets increased to 2.5 percent, then PSO will be getting Rs12 per MMBTU. However, the ministry and PSO are not willing to absorb the new margin of 2.5 percent saying this will expose PSO to another loss which may land the entity into another form of debt trap.