Gas companies ‘may go bankrupt’ without tariff hike, says Musadik

With the gas sector’s circular debt at Rs1.5 trillion, the Petroleum Division on Monday said the gas companies would go bankrupt without a hike in gas tariff that was now inevitable in view of the amended Oil and Gas Regulatory Act.

Minister of State for Petroleum Musadik Malik and Secretary Ali Reza Bhutta while testifying before the Senate Standing Committee on Petroleum said the government did not have money for bailouts and gas tariff increase could not be avoided under the revised Ogra Act passed by the previous government under the IMF programme.

Mr Malik told the meeting of the Senate committee presided over by Senator Abdul Qadir that gas companies’ assets and profits were going down and the government did not have the finances to bail them out. In such a situation, they would become bankrupt.

Ogra Chairman Masroor Khan also told the panel that a freeze on gas prices over the past few years had put the gas companies under financial strain.

Secretary Bhutta said the Ogra laws had been amended under the IMF programme and the gas prices determined by the regulator would automatically stand notified on completion of 40 days and the government could not stop this. He said the gas sector circular debt had reached Rs1.5tr and it was now an unsustainable situation.

Mr Malik, however, said the government would try to protect the poor but the most it could do was to cross-subsidise as domestic gas production was depleting and the imported LNG was too expensive.

Senator Qadir said the matter had become very challenging and all the stakeholders would have to look into it seriously. He was of the view that domestic (residential) consumers should be given top priority in the matter of gas supply and pricing. “Domestic users should be charged at affordable rates and industrial units as per the sector concerned,” he said, adding the CNG sector should be allowed to import gas on its own to reduce the burden on the government.

The businessmen from Karachi, however, demanded that gas supply should be stopped to residential consumers or at least be charged full gas prices as applicable to other sectors. “Where in the world are the residential consumers treated on top priority in gas supply? he questioned, adding that natural gas should be provided on economic considerations to compete in the world.

Karachi Chamber of Commerce and Industry leadership briefed the panel about the grievances of industrialists which includes the non-availability of gas for the last five months. Senator Qadir observed that the major cause behind the current economic deterioration was a gap between import and export value and to bring down this trade deficit, we need to give incentives and boost our local industries.

The committee also discussed the relevant rules which allow the Oil Marketing Companies to market High Octane Blending Component (HOBC97). Mr Malik said the Petroleum Division was regulating only those products which are consumed by masses on a large scale like RON 92 but HOBC97 did not fall in this category. He, however, assured the committee the petroleum division would make sure that all products including HOBC are as per the approved specifications.

While deliberating on the issue of the Explosive Department binding people to lease their properties particularly Oil Marketing Companies (OMCs) for business. The spokesperson of the Explosive Department told the committee that there is no such binding on an individual and the department only grants licence for petrol pumps to OMCs.

The committee considered the public petition on the issue of meter tampering and overbilling. The committee directed that the services of an independent third party should be hired to help the regulator and the companies to ensure authenticity and integrity of the detection of theft through scientific means.

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