ISLAMABAD: In a move that might come as a shock and surprise for consumers, the Oil and Gas Regulatory Authority (Ogra) decided on Sunday to increase gas price by 36% for the ongoing financial year (2016-17).
In Pakistan, natural gas rates are linked with prices of crude oil in the international market and fluctuate accordingly. Surprisingly however, Ogra sought the massive hike in gas rates even though global oil prices have slumped by more than 50% in recent past.
If approved by the prime minister house, the average prescribed gas price for the Sui Northern Gas Pipeline Limited (SNGPL) will go up by Rs57.89 per Million British Thermal Unit (mmbtu), while rates for SSGC will go down by Rs65.12 per mmbtu. The average rate for SNGPL consumers will be hiked from Rs422.74 to Rs480.63 per mmbtu, while for SSGC consumers, the price will be reduced from Rs419.36 to Rs354.24 per mmbtu.
The government has been enforcing a policy of maintaining higher gas prices thus far. Therefore, the government would implement the price for the SNGPL across the country and SSGC consumers would also be facing an increase in gas prices despite Ogra’s tariff reduction. The differential in prices between prescribed and notified by consumers would go to the provinces in the form of gas development surcharge (GDS), a senior government official told The Express Tribune.
The regulator approved Rs201 billion operating income and Rs161 billion operating expenditure for the SNGPL. It also approved Rs39.5 billion operating profit for the SNGPL. Ogra approved Rs175 billion operating income and Rs140 billion operating expenditure for the SSGC in addition to an operating profit for SSGC of Rs35.4 billion.
Prime Minister Nawaz Sharif has lifted a ban on new gas schemes for parliamentarians. Ogra approved Rs9 billion for the SNGPL to lay 5,500 kilometres of pipelines to provide new connections to consumers.
The regulator also rejected an SNGPL request to increase the benchmark of unaccounted-for-gas (UFG), allowing the company to recover 4.5% of total losses from consumers. Due to high losses, the company will have to face a seven billion-rupee hit on its profitability. The SSGC had requested to set the UFG benchmark at 7% — but the regulator set it at 4.5%. The SSGC will have to bear Rs13.8 billion dent on its profitability due to high loses.
The regulator has sent its decision to the federal government seeking advice for a prices notification for different categories of consumers.
Currently, the government is cross-subsidising gas prices for different consumers, including domestic by putting burden on other consumers.
The regulator sought the federal government’s advice whether or not it should continue its policy of cross-subsidising prices or give a direct subsidy to consumers.
Article originally published in Tribune