No increase in gas prices, govt to advise Ogra

ISLAMABAD: The government has decided not to increase the gas price for all categories of domestic consumers in current financial year 2016-17 even after the letter got from Oil and Gas Regulatory Authority (Ogra) seeking the written advice of the Ministry of Petroleum and Natural Resources asking whether the gas price would be increased or not.

“We will not increase the gas price as announced by Prime Minister Nawaza Sharif and are in the process to carve out the formula under which the gas price will not be increased and the revenue requirement of gas utilities -- Sui Northern and Sui Southern -- will also be fulfilled,” Minister for Petroleum and Natural Resources said and added to this effect, the government would issue the notification about the zero increase in gas price.

Earlier, Prime Minister Nawaz Shaif announced that he would not jack up the gas price when Ogra in its determination on February 6 recommended the increase in gas prices by 36 percent. Under the clause of 8.4 of Ogra Ordinance, in case the government does not respond to Ogra’s decision in 40 days, the prescribed prices of gas will be treated as sale price that will be notified by the Ogra.

Now on November 15, the period of 40 days is going to be over and so the Ogra has under routine activity sent a reminder to the Ministry of Petroleum and Natural Resources asking for the written advice on the decision of the regulator, chairperson of the regulator Ms Uzma Adil told The News.

She said if the government did not want to increase the gas price, it’s ok, but Ogra wanted it in written form. Chairperson argued that Ministry of Petroleum and Natural Resources in the court had submitted its statement saying that it would not defy the Ogra Ordinance. Under the law, the government had to give the advice in written form on the verdict of the Ogra in 40 days. The officials at Ogra told The News if the government did not increase the gas price, it was supposed to pick up the financial burden of the gas companies.

According to the officials of the Ministry of Petroleum and Natural Resources, the government is working on a formula under which the gas price will not be increased and the final revenue requirement of gas companies will also be catered to. The ministry has required the information as to which company is getting the GDS and other related data needed for making out the win-win formula for both the consumers and the gas entities.

The Ogra on October 6, 2016 dropped the bombshell by increasing the gas tariff by 36 percent in the current financial year 2016-17 owing to which the end consumers would have to pay mammoth amount of Rs341 billion more to gas companies.

The regulator had increased the gas price for Sui Northern Gas Private Limited (SNGPL) by Rs57.89 per MMBTU and decreased the gas price for Sui Southern Gas Company Limited (SSGCL) by Rs60.12 per MMBTU. The increase in the gas price will be applicable in the ongoing fiscal year. As per the formula of the federal government the increase in gas tariff determined for the Sui Northern will be applicable across the country.

  The decision of the Ogra had been dispatched to the Ministry of Petroleum and Natural Resources seeking the advice of the federal government till November 15 on deciding the increase in gas tariff particularly for domestic consumers and generally for other categories of consumers, top official of the regulator told The News.

The government is supposed to tell the Ogra on passing of full increase in gas price to the consumers or not and if not, the central government will tell how much subsidy for the certain categories of the consumers will be provided. In the advice sought by Ogra, the government is also supposed to assess as to how much direct and cross subsidy be extended to which category of consumers.

On top of that, the regulator had also passed the additional financial burden of Rs9 billion on to the consumers in the wake of the expenditure to be incurred on the various gas schemes that will now be initiated after the prime minister has softened the ban earlier imposed on the new gas schemes. The Ogra has under the PM directive approved the 5,500 kilometers new gas schemes for parliamentarians. The new gas schemes require the amount of Rs9 billion to get completed and the financial burden of Rs9 billion has been passed on to the end consumers.

The Ogra had finalised the operating income at Rs201 billion for Sui Northern and operating expenses at Rs161 billion in the financial year 2016-17 for Sui Northern. The regulator had, in nutshell, determined the operating profit for Sui Northern in current fiscal at Rs39.5 billion. In the determination, the Ogra has fixed the revenue for Sui Northern at Rs225 billion.

The average prescribed gas price for Sui Northern had been jacked up from Rs422.74 per MMBTU to Rs480.83 and for Sui Southern, the price had tumbled to Rs354.24 per MMBTU from Rs419.36 per MMBTU. Under the new formula of the federal government, the increase in the gas price fixed for the Sui Northern will be applicable for the end consumers across the country meaning by that the end consumers of Sui Southern will also be exposed to the increase in the gas price. The additional amount that Sui Southern was to be collected from its consumers would be deposited to the federal government in the head of Gas Development Surcharge.