OGRA to be empowered to pass on gas price rises to consumers

ISLAMABAD: In a bid to secure the remaining installments of the International Monetary Fund (IMF) US$6 billion bailout package, the government has started work on a plan to empower the Oil and Gas Regulatory Authority (OGRA) to directly pass on gas price increases to consumers. The proposed plan is to be discussed in a cabinet meeting scheduled for Tuesday (today) with the prime minister in the chair.

Presently, OGRA decides on the revision in gas prices bi-annually, in January and July. The government cross subsidizes the gas prices and passes on the different subsidy amounts to the different categories of the consumers.

Governments sometimes delay notifications of gas price increases for political reasons to avoid public outcry. The previous PML-N government had delayed one for four years, with the present government then having to pass on the full impact in ‘one go’.

The IMF has been pressing the Pakistan government to pass on the full impact of the gas price increase to consumers without interference in OGRA decisions. According to sources, it was the Petroleum Division that floated the proposal to amend the Ogra Ordinance 2002 in order to enable the regulator to directly pass on the increase to consumers.

It will be proposed in the cabinet meeting that the government should simply follow the Ogra Ordinance 2002 which mandates that it pass on gas price increases to consumers twice a year without regard for political considerations as, due to delays in notifying new gas prices, gas utilities face financial problems. According to a senior government official, empowering Ogra to pass on the increases directly to consumers would, therefore, help utilities meet revenue requirements in a timely manner. The official added, however, that that may add to the miseries of the poor. During the present government’s rule, gas prices have already gone up due to their being passed on from the previous government.

At present, an increase in gas prices of up to 31 per cent is on the cards as the two gas utilities-Sui Northern Gas Pipelines (SNGPL) and the Sui Southern Gas Company (SSGC) have filed petitions. Regulator Ogra has held public hearings in this regard. The two gas companies are seeking the increase to meet a revenue shortfall of Rs93.67 billion.

The SNGPL has sought an average increase of Rs194.01 per mmbtu in prescribed prices of gas for the consumers of Punjab and Khyber Pakhtunkhwa to Rs818.95/mmbtu. It has sought the increase to meet a revenue shortfall of Rs42.3 billion and also requested inclusion of last year’s shortfall of Rs28.725 billion in the final price determination.  The SSGC has come up with a demand of Rs62.52/mmbtu hike in gas prices to Rs799/mmbtu against the current price of Rs736.48 for consumers of Sindh and Balochistan.

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