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September 14, 2019

Hike in power, CNG tariff on the cards

Top Story

September 14, 2019

ISLAMABAD: The government is set to shift the burden of additional Rs21 billion to LNG consumers such as CNG, power, fertilizer and general industrial sectors to cope with the loss incurred on account of the diversion of costly LNG to domestic sector during last winter season.

This will result in the raise in electricity and CNG tariff and cost of fertilizer. The export industry (textile, carpet, leather, sports and surgical) will not suffer as it is being provided RLNG at 6.5 cents per MMBTU by the sitting government as a part of energy package to stimulate the country’s exports.

“Yes, we have moved the summary to the ECC recommending either to pass the burden valuing Rs21 billion on to national exchequer or shift to power, CNG and industrial sector, the said loss incurred due to diversion of LNG to domestic sector in last winter season to safeguard domestic consumers in Punjab from gas loadshedding, a top official of Petroleum Division told The News. Factually the loss was Rs29 billion but Rs8 billion was recovered through swap mechanism from gas bank in summer season, but now the system gas available with Sui Northern in summer season has dwindled to 925 mmcfd, which was once used to be over 1.5 bcfd and in the time to come the local gas availability for Punjab would further plummet.

“This means in the coming winter season, the government will have no option but to inject costly LNG to domestic sector in Punjab to offset gas shedding.

The official said Finance Ministry is also assessing three to four proposals to carve out the sustainable mechanism to wriggle the sector out of this crisis once for all on this front. However, he expressed inability to share the proposals.

The Petroleum Division moved the summary after Ogra did not include the said burden in the tariff. The Sui Northern had filed with Ogra the petition of revenue requirement for 2019-20 to include the loss of Rs29 billion in the tariff it incurred because of injecting the costly RLNG to the domestic sector in the last winter season.

The company had also included in tariff the loss it incurred on account of diversion of RLNG to domestic sector in winter season. But, Ogra did not pass this burden in the domestic consumers tariff. RLNG prices are ring fenced and Ogra cannot recover the loss on this account from domestic consumers.

Earlier, under the ECC decision taken on May 11, 2018, the gas banking mechanism has already been approved by Ogra under which RLNG is sold as system gas during the winter season while the same is recovered during the summer season on an ongoing and multi-year basis.

These adjustments allowed by Ogra on the basis of final accounts of the company on a ring fenced basis are in accordance with the Ogra law. But now under a new scenario, the bas banking mechanism is no more doable as in summer season the system gas available with Sui Northern has alarmingly dwindled to 925 mmcfd and there is no room to swap with the RLNG in summer season. Now the government has moved the summary to ECC to either shift the burden to LNG consumers or to the national kitty.

Ghyias Paracha, leader of CNG sector association firmly opposed the hike in the tariff against the diversion of RLNG to domestic sector. He said gas companies instead need to stop the gas theft worth Rs48 billion. He said that 93 percent of gas is being stolen in Karak, KP out of the UFG loss of Sui Northern. In Karak, there is no law and order situation, but Sui Northern is not inclined to end the gas theft there, which raises eyebrows of many.

The Sui Northern pleaded that the loss of Rs21 billion has further aggravated the economic miseries of Sui Northern, which are already on the rise, on account of provision of RLNG to the consumers, zero rated industry, fertilizer, CNG and the power sector. In the wake of delayed recoveries by power sector management, the circular debt in LNG sector has swelled to Rs72.6 billion.

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