Ogra approves gas price hike for Sindh, Balochistan

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has allowed the Sui Southern Gas Company Limited (SSGCL) to charge 5.4 percent more charges from gas consumers to recover its multi-billion rupees shortfall.

It notified a 5.4 percent increase in prescribed gas price and fixed it at Rs778.59/mmbtu for SSGCL to recover Rs14.27 billion shortfall in estimated revenue requirement (ERR) for the financial year 2020-21 including prior year shortfall of Rs50.983 billion. It also allowed the gas utility to increase the gas meter rent from Rs20 per month to Rs40 per month from domestic consumers.

It is pertinent to mention here that the gas prices would be increased in Balochistan and Sindh as SSGC is the gas provider for these provinces.

“If the federal government fails to so advice within the said 40 days and the prescribed price for any category of retail consumersdetermined by the authority is higher than the most recently the notified sale price for that category of retail consumers, the authority shall be obligated to notify in the official gazette the prescribed price as determined by the authority to be the sale price for the said category,” the decision said.

The regulator suggested that the petitioner should focus and make concerted efforts on reduction of UFG, improvement of internal control systems, increase of efficiency, quality of service, emergency response plan, and effective cost control, reduction measures should be taken to remain financially viable instead of making all out efforts to seek passing on of costs associated with its own inefficiencies, malpractices, thefts, bad debts, and alike to the consumers.

During the public hearing, managing director explained that the petitioner's RERR for the said year is reflecting a surplus of Rs22.745 billion. However, after the inclusion of Rs50.983 billion, being unadjusted shortfall for prior years up to FY 2017-18, resulted in a shortfall of Rs.28.242 billion or Rs78.95 per mmbtu for indigenous gas business.

The petitioner briefly explained the reasons for its claims including transmission and distribution (T&D) expenses and fixed assets. The petitioner requested the authority for upfront adjustment of HR cost and other expenses for its recovery as yearend allowance results in adjustment of GDS or accumulation of revenue shortfall.

The interveners during the hearing said that it was highlighted that RERR scope is limited to the extent of actual changes in wellhead gas prices/cost of gas. It was highlighted that dollar prices of crude oil and HSFO are volatile. Therefore, the petitioner's estimates be checked by the authority. Moreover, dollar parity has been taken by the petitioner at an exaggerated level, since in recent months appreciation in Pak rupee parity against US dollar has been observed.

Textile is one of the largest gas consumer groups with record earnings of foreign exchange for the country showing a 20 percent increase in exports. Increased cost, if any, to be allowed by the authority shall affect/reduce textile sector exports.

Cross subsidy was vehemently opposed by the textile sector since it affects its competitiveness in the international market. It was requested to allow a new gas connection to the export-oriented industry in Karachi as it would increase country export and bring foreign exchange. Ban, if any, needs to be abolished.

Interveners demanded that the exorbitant costs and expenditure of the petitioner's management must be capped or linked to actual performance improvement as the same is ultimately passed on to consumers.

They further said that reduction in the world oil prices must be passed on to the industry as per the defined formula otherwise it will have a devastating effect on Pakistan's economy. It was demanded that gas companies be asked to cut their rate of return from 17.5 percent to 15 percent.