Increase is one of prior actions under agreement with IMF for $6bn bailout package. — AFP/File
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Ogra seeks massive rise in gas tariff

ISLAMABAD: With a 47 per cent increase in average prescribed gas price, the Oil and Gas Regulatory Authority (Ogra) on Friday requested the government to jack up rates for domestic consumers by up to 205pc with effect from July 1 to keep the gas companies afloat.

In two separate determinations forwarded to the government, Ogra allowed about 47pc or Rs237 per unit (million British thermal unit) increase in the prescribed price of Sui Northern Gas Pipelines Limited (SNGPL) to Rs738 from Rs501. It said the company’s unaccounted for gas (UFG) losses stood at about 11pc.

Likewise, the regulator allowed 28pc or Rs160 per unit increase in the prescribed price of Sui Southern Gas Company Limited (SSGCL) to Rs738 from Rs578. SSGCL’s UFG losses stood at a whopping 16pc, Ogra said.

Increase is one of prior actions under agreement with IMF for $6bn bailout package

The increase in gas prices is one of the prior actions of the recently concluded agreement with the International Monetary Fund (IMF) for a $6 billion bailout package.

Ogra said the main reason for increase in the prescribed gas price was the cost of gas, mainly due to the current exchange rate of Rs150 against a dollar. It also allowed about 20pc of previous year’s revenue shortfall of SNGPL carried forward to the next year’s price adjustment. The combined impact of the increase in the prescribed price of both companies for recovery from consumers has been estimated at about Rs60bn.

As part of rationalisation of tariff structure, Ogra recommended to the government to increase rates in a manner that first two slabs of domestic and special commercial consumers should pay at least half of the average cost of gas that were over-subsidised at present. The third slab (100-200 cubic metres) should be charged 75pc of the average cost of service, the fourth slab 100pc and the top category (over 300 cubic metres) 150pc.

In doing so, the regulator worked out an increase of 205pc for the first (lifeline) slab consuming less than 50 cubic metres per month to Rs369 per MMBTU from Rs121. The monthly bill of this category (about 18pc of total consumers) will increase by 188pc to Rs789 from Rs274.

The rate for the second domestic slab (50-100 cubic metres) has been proposed at Rs369, instead of Rs127 per MMBTU, up by 191pc. The monthly bill of this category of 29pc consumers will increase by 183pc to Rs1,555 from Rs550.

The regulator worked out the rate for consumers using 100-200 cubic metres per month at Rs553 per MMBTU, instead of Rs264, an increase of 110pc. The monthly bill of this category of 32pc consumers will increase by 74pc to Rs3,854 from Rs2,215.

The next slab of 201-300 cubic metres per month has been proposed at Rs738 per MMBTU, instead of Rs275, showing an increase of 168pc. The monthly bill of this category will increase by 101pc to Rs6,918 from Rs3,449. About 12pc consumers fall in this category.

Ogra worked out an increase of 42pc for consumers using 300-400 cubic metres per month to Rs1,107 per MMBTU from Rs780. In contrast, the regulator worked a reduction of 24pc in existing rates of consumers using more than 400 cubic metres per month to Rs1,107 per MMBTU from Rs1,460.

The regulator said the Lahore-based SNGPL had sought 144pc (Rs723 per MMBTU) increase in the average prescribed price for its consumers spread over Punjab and Khyber Pakhtunkhwa, but was allowed “only 47pc (Rs237 per unit) increase” for the next fiscal year (2019-20).

It said the Karachi-based SSGCL had sought an increase of Rs176 per unit (30pc) in its average prescribed price, but was allowed “only Rs160 per unit (28pc)”. The company is supplying natural gas to consumers in Sindh and Balochistan.

Ogra said it had proposed previous one slab benefit to consumers to minimise the price impact, adding that the remaining unabsorbed revenue shortfall determined by the regulator would be recouped from the rest of consumer categories across the board. Accordingly, the SNGPL and SSGCL would charge 31pc and 20pc, respectively, higher rates to all bulk consumers, including general industrial, zero-rated, fertiliser and power sectors and CNG stations.

Under the law, the regulator is required to forward its determination to the government latest by May 20 and Nov 20 every year. The government is required under the law to seek any change, if it so consider, to the proposed increase for various consumer categories within 40 days to Ogra for notification with effect from July 1 and Jan 1, but without affecting the overall determined revenues. The gas prices are changed twice a year.

The Pakistan Tehreek-i-Insaf government has already hiked gas prices by up to 143 per cent during the ongoing financial year — September 2018. Insiders said a major consideration for higher gas rates was to reduce losses in the public sector entities as required under the IMF bailout package.

Published in Dawn, May 18th, 2019

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