Gas to cost more for Punjab, KP consumers

Increased by Rs 107.81 per MMBTU in Punjab, KP; cheaper by Rs25 in Sindh, Balochistan; theft worth Rs12.5 billion also passed on to Sui Northern consumers

ISLAMABAD: Gas consumers are set to experience a phenomenal increase of Rs107.81 per MMBTU in the tariff from January 1, 2016.

According to the decision taken by the Oil and Gas Regulatory Authority (Ogra) about the Final Revenue Requirement (FRR) of Sui Northern for the year 2015-16 (a copy of which is available with The News), the average gas price has been increased to Rs510.95 from Rs403.14 per MMBTU.

Thus the Sui Northern will be able to collect an additional amount of Rs 213 billion in the financial year. On top of that, the regulator has also allowed Sui Northern to charge Rs5 billion from the legitimate consumers against 1 per cent loss being incurred because of gas theft in Karak and Bannu districts of Khyber Pakhtunkhwa as well as Rs7.50 billion against the 1.5 percent loss in the wake of non-gas consumers in Punjab and Khyber Pakhtunkhwa. The non-gas consumers are those who are using gas without the installation of meters.

The regulator in the same decision claims that the Unaccounted for Gas (UFG) has not increased and it stays at 4.5 per cent. However, Ogra has rejected the plea of Sui Northern under which the company desired to include the cost of the LNG pipeline (Rs75 billion) in the tariff.

According to the regulator, Sui Northern should get Rs 130 billion in financial assistance in the two financial years from the finance ministry under the head of Gas Infrastructure Development Cess (GIDC). The decision mentions that the government has so far collected Rs 200 billion from consumers under the head of GIDC.

The GIDC Act says the amount collected by the finance division is purely for the laying of pipelines in the country. It is worth recalling that Pakistan is considering the TAPI, IP and North-South pipelines.

However, Ogra has slashed the tariff for Sui Southern by Rs25.32 per MMBTU, saying that the said company has started taking royalty from the JJVL LPG Plant owing to which its average gas tariff will tumble to Rs452.24 per MMBTU from Rs477.56 per MMBTU. The company will earn Rs 184 billion during 2015-16 as its UFG is at 7 per cent because of the stay granted by the Sindh High Court.

The regulator has also punished the legitimate gas consumers for the year 2014-15 after both Sui Southern and Sui Northern failed in controlling gas theft which amounted to Rs 12.5 billion.

Earlier, the regulatory body had already decided to pass the burden of its inefficiency amounting to Rs 25 billion on to the end consumers by increasing the UFG volume in tariff by 2.5 per cent to 7 percent from the existing 4.5 per cent in its determinations about the FRR of gas utilities (Sui Southern and Sui Northern) for 2012-13 and 2013-14.

If the impact of losses because of inefficiencies of the last three financial years, 2012-13, 2013-14 and 2014-15, are calculated, it comes to Rs 37.50 billion which will be passed on to the end consumers.

However, a top Ogra official says the losses for financial years 2012-13 and 2013-14 have been worked out in the head of law and order and non-gas consumers at just over Rs 18 billion and this amount will not be passed on to the consumers as the amount will be adjusted in the Gas Development Surcharge (GDS) the provinces are getting from the Centre. However, the losses of 2.5 per cent for the year 2014-15 will be collected from consumers.

However, official sources insisted that Ogra had cleverly increased the UFG benchmark from 4.5 per cent to 7 per cent by increasing the 2.5 per cent losses (1 per cent in the head of law and order situation and 1.5 per cent on account of gas consumers). Thus the decision may trigger another controversy and emerge as a scam.

Ogra says the gas companies have been permitted to recover the losses from consumers under the provisions allowances and disallowances, arguing that the UFG is still at the 4.5 per cent level.

Ogra Chairman Saeed Ahmad Khan confirmed that the authority had allowed the gas utilities to charge the end consumers for the losses because of the deteriorating law and order situation in some areas of Balochistan for the financial years 2012-13 and 2013-14. Likewise Karak and Kohat are the areas where massive gas theft is common and are inaccessible because of the ongoing military operation against terrorism.

Khan, however, said he was unable to say anything about the percentage of losses the gas companies would charge from the consumers.

However, the Ogra officials argued that the regulator skilfully increased the UFG for the year 2014-15 as it had done earlier for 2012-13 and 2013-14 without using the term by 2.5 per cent, inflicting a colossal loss of Rs12.50 billion and Rs25 billion respectively to the end gas consumers.

In November 2014, the officials said, the government sent a policy to the Ogra, asking it to accommodate the loss-making companies in a way that the LHC verdict on UFG and the ongoing accountability case of former Ogra chairman Tauqir Sadiq were not affected.

The regulator was asked to increase the tariff because of the losses these companies are sustaining in the wake of gas theft for four reasons - bulk retail gas consumption, non-gas consumers, law and order situation and minimum billing.

According to the officials, the reasons are already accommodated in the 4.5 per cent UFG benchmark that has already been allowed. And the new 2.5 per cent increase in the UFG is illegal as under the Ogra Ordinance, the authority cannot increase the benchmark in the FRR. However, it can increase it in the Estimated Revenue Requirement.

It is pertinent to mention that Tauqir is facing an accountability court case for increasing the UFG benchmark from 5 per cent to 7 per cent.