Industry rejects SSGC’s plea for gas price hike

ISLAMABAD: Major stakeholders including commercial and industrial representatives on Monday opposed increase in prescribed gas prices demanded by the Karachi based Sui Southern Gas Company Ltd (SSGCL) to meet its revenue requirements for the current fiscal year.

Instead the All Pakistan Textile Mills Association (Aptma) made a case for cut in the well-head gas price to reduce the cost of gas supply and cover up SSGCL’s revenue gap. This was also supported by the SSGCL. Other key stakeholders including car manufacturers, ceramics association and Karachi Chamber of Commerce and Industry opposed Rs78.95 per unit increase in tariff demanded by the SSGCL.

This was the crux of a public hearing conducted by Oil and Gas Regulatory Authority (Ogra) on SSGCL’s petition for increasing its prescribed price by Rs78.95 per million British Thermal Unit (mmBtu). Vice Chairman Ogra Noor-ul-Haq presided over the hearing.

Speaking on behalf of Aptma Sindh and Balochistan, Razi-ud-Din Razi demanded that well-head price of gas should be reduced from around $4.08 per mmBtu at present, under section 5 of the petroleum policy, which will not only help cutting the gas price but will also cover the revenue gap of the SSGCL.

In its petition for review of its estimated revenue requirements/prescribed prices for 2020-21, SSGCL claimed that it was facing revenue shortfall of Rs28.24bn for which increase in prescribed price was inevitable.

Mr Razi said the well-head gas price in Pakistan was the highest among the regional countries. At benchmark of $40 barrel of oil, the gas well-head price in Pakistan was around $4.08 per mmBtu. In India and Bangladesh, the well-head price ranged between $1.5 to $2.5 per mmBtu, he added.

Mr Razi who had led Oil and Gas Development Company and Khyber Pakhtunkhwa Oil & Gas Company in the past said the second main contributor of high price was unaccounted for gas (UFG) losses which should be reduced for better financial health of the SSGCL and also to keep the prices low.

The representatives of the SSGCL also termed the unaccounted for gas (UFG) a menace and contended that the company was working vigorously to scale down losses.

The Aptma representative also termed that Gas Development Surcharge (GDS) claimed by the SSGCL in its petition illegal saying there was no concept of negative GDS and hence it should not be included in the revenue requirement. He contended that by definition GDS was not a fixed tax which was receivable from Government of Pakistan or and not the consumers.

Referring to the original and revised petitions, Mr Razi said the gas sales in terms of mmBtu was changed by the petitioner by almost 36pc which could not be possible and demanded that forecasting models should be improved and calibrated under the aegis of the regulator.

The intervener demanded that the cost of gas sold should be recalculated with average cost of gas at Rs526 per mmBtu as per previous determination of Ogra instead of Rs548 per unit claimed by the company. Likewise, the transmission and distribution cost of Rs62.5 per unit claimed by the company should also be set aside in line with Ogra’s earlier decision of July this year.

Representative of Karachi Chamber of Commerce and Industry Atif Jameel while opposing the SSGCL demand for higher prescribed prices demanded that the prices of gas should not be changed for next two years. “If Corona has affected the financial position of the SSGCL, so is the entire industry and KCCI members have been affected negatively by the pandemic”, he asserted.

The representatives of the ceramic industry and car manufacturing industry also opposed the tariff hike demand of the SSGCL. The Ogra vice-chairman said the regulator will further deliberate over the petition of SSGCL and the points raised by the stakeholders before giving its determination.

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