Up to 47pc hike proposed in gas tariff

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has exploded the gas bomb by proposing a massive hike in the gas price by 28-47 percent for the next budgetary year 2019-20.

This means that the gas tariff for the Sui Northern gas consumers has gone up by 47 percent (Rs236.81 per mmbtu) against the demand of 144 percent (Rs722.51 per mmbtu).

Similarly, for gas consumers of Sui Southern, the tariff has been increased by 28 percent (Rs159.68 per mmbtu) against the demand of 30 percent (Rs176.41 per mmbtu).

The government earlier in September 2018 increased the gas tariff up to 143 percent owing to which the consumers received huge gas bills during December to February.

Though this time, Ogra massively slashed down the demand of both the gas companies while giving the tariff determination, but the main reason for the proposed hike is due to cost of gas owing to the current dollar-rupee exchange rate parity, which is taken at Rs150 per US dollar.

Ogra Chairperson Uzma Adil, when contacted, said in case the dollar value goes down in the times to come, the regulator will adjust the parity accordingly. However, she said that Ogra has determined the price as per its own analysis as unnecessary demands in the tariff petitions of the gas companies have not been entertained.

To a question, she explained that the full shortfall of the last year that both companies are facing has not been passed on to the consumers, rather 1/5th previous year’s shortfall of both the companies has been allowed to pass on the end consumers. She said that as per the ECC decisions, the last year’s deficit will be passed on to consumers in staggered manner in four years’ time. However, the government will take the Ogra determination to the ECC for final approval depending upon the subsidy the government will extend it or not. The government will have to increase the gas tariff from July 1, 2019.

According to a senior official of the Petroleum Division, the government is yet to finalise the slabs of the gas pricing formula as existing one comprises on 7 slabs.

The PTI government has, in principle, decided to give one slab benefit to the gas consumer. Now if the government reduces the slabs from 7 to 5 and extends one slab benefit, then the decision in gas tariff hike will be taken accordingly. However, Ogra has determined the tariff for 7 slab categories under the existing formula.

The regulator has proposed the 50 percent half of the average cost of service for first two slabs categories (up to I HM3), 75 percent of average cost of service for third slab ( over 1-2 HM3) and for slab 4, the gas tariff has been determined at 100 percent of cost of service will be and for the last slab (over 3-HM3) the tariff has been determined at 150 percent of cost of service. Ogra has suggested to the government to extend to end consumers the previous slab benefit.

The remaining unabsorbed revenue shortfall determined by Ogra has been recouped by rest of categories of consumers across the board. Accordingly, bulk consumers of SNGPL and SSGCL observe average increase of 31 percent and 20 percent respectively.

The regulator has also allowed SNGPL to build 8,000 kilometres distribution network with an initial cost of Rs5.3 billion. It also allowed Rs1.12 billion to recover from the gas consumers for rehabilitation of system and unaccounted for gas (UFG) control. The Authority allowed Rs344 million for 450 industrial and 5,000 commercial gas connections. An amount of Rs3.2 billion has been allowed for 400,000 new domestic gas connections. The regulator allowed 6.30 percent UFG. Out of total gas theft amounting to 49.06 billion cubic feet per day, Ogra has put the burden of 29.2 bcfd on the consumers. The total UFG has been assessed at 10.5 percent.

The SSGCL had projected a total revenue shortfall of Rs254.7 billion for next financial year 2019-20 and Rs24.9 billion for previous years’ adjustment. The regulator allowed passing 270.7 billion that include 245.8 billion for next financial year’s adjustment and Rs24.9 billion for previous year’s adjustment. The total UFG of the company has been calculated at 15.69 percent. The regulator allowed 6.30 percent from the gas consumers amounting to Rs19.2 billion.