ISLAMABAD: Rejecting the Oil and Gas Regulatory Authority’s (Ogra) recommendation for 2-6 per cent reduction in the prices of natural gas, the government has decided to keep rates unchanged to partially offset losses of gas companies.

A senior government official told Dawn that the regulator was conveyed that on completion of mandatory 40-day deadline prices will remain unchanged for the time being. “There is no need for a fresh notification,” the official said when asked if it would require a fresh notification to maintain prices.

The official agreed that regulator had determined 2-6pc decrease in the gas prices but at the same time advised the government to think about adjustment of some of the previously outstanding revenue requirements. The prime reduction is so minor that it would not provide any measurable relief to consumers.

Move to help offset SNGPL, SSGCL losses partially

On July 14, Ogra had determined 2-6pc reduction in the prescribed prices of two gas utilities for fiscal year 2020-21 to pass on partial impact of decline in international oil prices to gas consumers. It had sought an advice from the government on gas sales price for each category of consumers.

The regulator has set an average prescribed price for Sui Northern Gas Pipelines Limited (SNGPL) at Rs623.31 per million British thermal unit (mmBtu) instead of the existing rate of Rs664.25 per mmBtu, down by 6pc. The company had demanded a prescribed price of Rs1,287 per mmBtu, along with Rs174bn previous year adjustment and Rs73bn on account of LNG diverted to residential and commercial consumers in winters. The regulator approved the annual revenue requirement of the company at Rs219 billion for FY2020-21. SNGPL has gas supply network in Punjab and Khyber Pakhtunkhwa.

Likewise, Ogra determined an average prescribed price for Sui Southern Gas Company Limited (SSGCL) at Rs750.90 per mmBtu against its existing average rate of Rs798.18 per unit, down 2pc. The company had demanded a price of Rs881.53 per mmBtu with some prior year adjustments and LNG costs. The regulator approved SSGCL’s revenue requirement for FY2020-21 at Rs270.18bn.

Under Section 8(3) of the Ogra law, the federal government is required to advise the regulator within 40 days the minimum charges and the sale price for each category of retail consumers for notification in the official gazette.

The managements of SSGCL and SNGPL had claimed that they were going under due to prior year outstanding adjustments that were approved by the regulator as legitimate heads but could not be notified by the government and the Ogra.

The regulator agreed to the demand saying the increases were previously allowed as genuine expenditures but these were not passed on to the consumers by the government for its social-political reasons.

The regulator had declined to allow those allowances again in revenue requirement for FY2020-21 since these belonged to years for which it had separately determined revenue requirements but asked the government to consider a way out to clear backlog including through provision of subsidy from the budget.

Published in Dawn, August 27th, 2020