ISLAMABAD: On Monday, major stakeholders, including commercial and industrial leaders, objected to the rise in the prescribed gas prices sought by Sui Southern Gas Company Ltd (SSGCL), headquartered in Karachi, to fulfil its revenue requirements for the current fiscal year.
Instead, the All Pakistan Textile Mills Association (Aptma) made a case for reducing the price of well-head gas to minimise gas supply costs and fill the income deficit of SSGCL. The SSGCL has also endorsed this. Other primary stakeholders, including car makers, the ceramics association and the Chamber of Commerce and Industry of Karachi, opposed the SSGCL’s requested tariff increase of Rs78.95 per unit.
This was the heart of a public hearing on SSGCL’s petition by the Oil and Gas Regulatory Authority (Ogra) to raise its prescribed price by Rs78.95 per million British Thermal Unit (mmBtu). The hearing was watched over by Vice Chairman Ogra Noor-ul-Haq.
Speaking on behalf of Aptma Sindh and Balochistan, Razi-ud-Din Razi requested that under section 5 of the petroleum budget, the well-head gas price should be lowered from about $4.08 per mmBtu at present, which would not only help minimise the gas price but will also fill the SSGCL’s revenue deficit.
SSGCL argued in its proposal for analysis of its projected sales requirements/prescribed prices for 2020-21 that it faced a revenue deficit of Rs28.24bn for which a rise in the prescribed price was unavoidable.
Mr. Razi said Pakistan’s well-head gas price was the highest among the regional countries. The gas well-head price in Pakistan was about $4.08 per mmBtu at a $40 barrel oil benchmark. The well-head price varied from $1.5 and 2.5 per mmBtu in India and Bangladesh, he said.
Mr. Razi, who had previously headed the Oil and Gas Production Company and Khyber Pakhtunkhwa Oil & Gas Company, said that the second major contributor to high prices was unaccounted for gas (UFG) losses that should be minimised for the SSGCL’s better financial health and also to keep prices down.
The SSGCL members have called the unaccounted for gas (UFG) a threat and argued that the organisation was working actively to minimise losses.
The representative of Aptma also declared Gas Production Surcharge (GDS) illegal by the SSGCL in its petition arguing that there was no definition of negative GDS and hence that it should not be included in the criteria for revenue. He claimed that GDS was not by definition, a fixed tax receivable by the Government of Pakistan and not by customers.
Referring to the initial and amended requests, Mr. Razi claimed that the petitioner had changed gas sales by almost 36pc in terms of mmBtu, which could not be possible, and recommended that forecasting models be strengthened and calibrated under the regulator’s aegis.
The intervener requested that as previously estimated by Ogra, the cost of the gas sold should be recalculated with the average cost of gas at Rs526 per mmBtu instead of Rs548 per unit claimed by the business. Similarly, in accordance with Ogra’s previous July ruling, the transmission and distribution costs of Rs62.5 per unit claimed by the company should also be set aside.
In opposition to the SSGCL’s demand for higher recommended rates, Atif Jameel, representative of the Karachi Chamber of Commerce and Industry, requested that gas prices should not be adjusted for the next two years. If the financial status of the SSGCL has been affected by Corona, then the entire sector and representatives of KCCI have been adversely affected.
The SSGCL’s tariff hike demand was also opposed by the leaders of the ceramic industry and the automotive manufacturing industry. The Ogra vice-chairman said that before giving its determination, the regulator would further deliberate on the SSGCL petition and the points posed by the stakeholders.