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Status quo: Govt rejects proposal, keeps gas prices unchanged

ISLAMABAD: The government has decided to keep gas prices unchanged except for the fertiliser and power sectors despite an increase of up to 36% recommended by the Oil and Gas Regulatory Authority (Ogra) for the ongoing financial year 2016-17.

Ogra had decided to increase gas prices by 36% and sent the decision to the petroleum ministry to seek its advice and notify the new prices.

Following the advice of the federal government, the regulator on Friday notified a cut in gas prices for the fertiliser and power sectors. However, prices were kept unchanged for other consumers including the domestic users.

The Economic Coordination Committee (ECC) had recently slashed gas prices for the power sector by about 35% to Rs400 per million British thermal units (mmbtu) from Rs613 per mmbtu aimed at eliminating the price disparity and reducing the electricity price. Ogra has implemented this decision.

However, the government reduced the gas price for the fertiliser sector by 41 paisa per mmbtu.

Ogra had approved an increase in the average prescribed gas price for Sui Northern Gas Pipelines Limited (SNGPL) by Rs57.89 per mmbtu while prices for Sui Southern Gas Company (SSGC) were to go down by Rs65.12 per mmbtu.

The average rate for SNGPL consumers was to be increased from Rs422.74 to Rs480.63 per mmbtu, while for SSGC consumers, the price was to be reduced from Rs419.36 to Rs354.24 per mmbtu.

“Now, the government will provide money to SNGPL to meet its revenue requirements through the gas development surcharge,” said an official.

The regulator has approved Rs201 billion operating income and Rs161-billion operating expenditure for SNGPL. It has also approved Rs39.5 billion operating profit for the company.

For SSGC, Ogra has approved Rs175-billion operating income and Rs140-billion operating expenditure in addition to an operating profit of Rs35.4 billion.

Prime Minister Nawaz Sharif has lifted the ban on new gas schemes for parliamentarians. Ogra has approved Rs9 billion for laying 5,500 kilometres of pipelines to provide new connections to SNGPL consumers.

The regulator rejected an SNGPL request to increase the unaccounted for gas (UFG) benchmark to allow the company to recover 4.5% of total losses from the consumers.

Due to the high losses, the company will have to face a Rs7 billion hit on its profitability.

SSGC had requested to set the UFG benchmark at 7%, but the regulator set it at 4.5%. SSGC will have to bear a dent of Rs13.8 billion on its profitability due to the high losses.

Currently, the government is cross-subsidising gas prices for different consumers, including domestic users by putting burden on other consumers.

The regulator has sought the federal government’s advice whether or not it should continue its policy of cross subsidising prices or give a direct subsidy to the consumers.

courtesy : Express Tribune

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