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November 27, 2020

SNGPL wants tariffs linked to supply capacity to meet revenue shortfall

Business

November 27, 2020

ISLAMABAD: Cash-bleeding Sui Northern Gas Pipelines (SNGPL) on Thursday sought the regulator’s permission to align tariffs with pipeline transportation capacity rather than the actual throughput – a proposed pricing formula widely opposed by high gas-consuming businesses.

SNGPL officials told a public hearing by Oil and Gas Regulatory Authority (Ogra) that it wants revenue of Rs29 billion to cover cost of re-gasified liquefied natural gas (RLNG) supply. The company is facing revenue shortfall of Rs35.5 billion on sale of indigenous gas, the officials said.

SNGPL borrowed loans from commercial banks to build pipelines. The company paid Rs35 billion to banks in loan repayments. Main reasons for increase in gas prices are devalued rupee and high prices of crude oil, according to the officials.

The company also sought implementation of the Economic Coordination Committee’s decision of increasing meter rent from Rs20 to Rs40. The company has currently 2.7 million pending applications for new gas connections. Due to high pendency, the applicants get their gas connections in three years, officials of the SNGPL said.

Representatives of textile and compressed natural gas (CNG) sectors opposed the new gas pricing formula proposed to the Ogra. The pipelines have high capacity to transport gas, while actual supply remains low due to gas shortages, they said.

Ogra has already allowed rate of return based on utilisation of pipeline in line with gas volumes, and not the full capacity of the pipelines. Now, SNGPL wants capacity charges whether or not supply is made. The government had also announced allocation of idle capacity to private sector for the pipelines’ full utilisation, but the company wants to also charge from consumer of this idle capacity.

Textile and CNG sectors opposed this move of the SNGPL and termed it as step to further bolster its monopoly in the gas distribution. It is also against the government’s earlier decision of allowing private sector to import the gas and market it, they said.

Ghayas Paracha, chairman of CNG Association said SNGPL moves a petition for increasing gas tariff on different accounts after each six months. But, when there is time of reducing gas tariffs, the company starts claiming revenue shortfall on account of outstanding.

“It is unfair to put burden on domestic consumers who are already using expensive RLNG,” said Paracha. “Fertiliser and export-oriented sectors are already getting subsidised gas, but CNG sector is affected the most due to increase in gas prices. CNG sector should not be burdened more that is already affected due to using expensive gas.”

Shahid Sattar, a representative of All Pakistan Textile Mills Association, opposed the SNGPL’s petition. “Consumers are already paying double tariff on account of RLNG expansion, debt servicing and rate of return on assets,” he said.

Sattar strongly opposed SNGPL’s proposal of seeking 300,000 new gas connections, while there is a gas shortfall in the system. Ogra has already allowed 400,000 gas connections for the current fiscal year.