Pakistan News

Stakeholders oppose SNGPL’s demand for 123pc hike in gas rate

ISLAMABAD: Despite facing gas shortfalls, the Sui Northern Gas Pipelines Ltd (SNGPL) on Thursday demanded 123 per cent increase in its gas rate, 100pc increase in meter rent and 700,000 fresh domestic connections, which was strongly opposed by the stakeholders including textile industry and transport sector.

At a public hearing presided over by Oil & Gas Regulatory Authority (Ogra) Acting Chairman Noorul Haque, the stakeholders contended that there was no justification for network expansion when the gas utility was unable to meet the requirements of existing consumers.

They contended that such a request was being pushed because the company’s business model was imprudently based on 17.43pc guaranteed return on assets and the cost of system expansion for future consumers was built into the gas price of existing consumers who keep on facing gas shortages and low pressure.

“When they don’t have the gas for existing consumers, why are they seeking expansion of pipeline network”, wondered Planning Commission Energy former member Shahid Sattar while representing the All Pakistan Textile Mills Association at the meeting. He said it was all the more illogical when the gas utility had been given approval by Ogra for 400,000 new connections for current fiscal year but had not yet been installed and they were now seeking permission for more connections.

He also opposed the company’s request for allowing cost of gas on the basis of actual throughput (supply) instead of pipeline capacity as had been the case so far under Ogra decisions. He said the company wanted more connections which meant the gas demand was quite higher and the company needs to improve supply, otherwise it would continue changing its numbers and resultantly the cost of actually gas consumed.

Mr Sattar also questioned the logic for revised petition within a short period saying the industrial and commercial consumers were at a disadvantage who could not recover the revised costs on products they might have already sold.

All Pakistan CNG Association Chairman Ghiyas Paracha said the public hearings on gas pricing had become questionable because every time the company comes up with a request for increase in gas which the regulator allows after some deductions. He said it was totally unfair to burn imported LNG in the residential sector and book its cost to others like CNG stations who are not actually supplied the gas.

On top of that, he bemoaned that even diversion of cost of LNG consumption by residential sector was not charged to fertiliser and other industrial sector and ultimately the CNG sector suffers. Also, the gas increases based on crude price are immediately passed on to consumers but when crude prices decline the reduction in gas prices were withheld for one or another justification.

The SNGPL team led by the company’s Managing Director Amir Tufail demanded increase in its prescribed price and meter rent by up to 123pc and 100pc respectively. It was contended that the company required an increase of Rs774 per unit (123pc) in its prescribed prices to meet its estimated revenue requirement for FY21, including unrecovered price dues of about Rs215 billion of previous years.

The SNGPL also demanded about 100pc increase its monthly meter rent, saying the federal cabinet had already decided that meter rent should be increased from Rs20 to Rs40 per month.

The SNGPL has claimed its average prescribed price for FY21 at Rs1,405 per unit, up from existing rate of Rs631.41 per unit. The demanded increase of Rs773.50 per unit worked out to be about 123pc higher than existing rate. This is estimated to generate about Rs250bn in additional revenue. This include about Rs36bn additional funds on account of revenue shortfall in FY21 and about Rs215bn of previous years.

Moreover, the SNGPL has also estimated the cost of service of Regasified Liquefied Natural Gas at Rs72.33 per unit for current fiscal year. Both the companies had filed their petitions the same day on Oct 15, which were then revised on Nov 4.

Published in Dawn, November 27th, 2020

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