To enable the two state-owned gas utility companies to urgently complete gas supply schemes in the constituencies of influential parliamentarians, the Oil and Gas Regulatory Authority (OGRA) has recommended an increase of 11 to 14 percent in their tariff effective from January 1, 2012.
An official source said OGRA has sent its recommendations to the government suggesting an increase of Rs 43.92 per mmBTU in the tariff of Sui Northern Gas Pipelines Limited (SNGPL) and an increase of Rs 34 per mmBTU in the tariff of Sui Southern Gas Company Limited (SSGCL). The increase in tariff has been allowed under the pretext of expansion of the gas distribution network and recovery of the unaccounted for gas losses as a result of theft. If the government approves the recommended increase, the worst affected would be domestic consumers and their gas bills will rise significantly even though their supply will be reduce because of the expansion in the distribution network without a required accompanied increase in gas production.
SNGPL had sought an increase of 30 percent but was granted 14 percent, while SSGCL had sought a 14 percent increase but got 11 percent. The two state-owned entities have abnormally high unaccounted for gas losses of 13.5 percent (380 million cubic feet per day, or mmcfd) out of which 200mmcfd is lost every day by SNGPL and 180mmcfd by SSGCL, a source said.
The international benchmark for unaccounted for gas losses is 5 percent. The OGRA wanted to set it at a lower level but it was opposed by gas utility companies, who wanted it to be maintained at 13 percent in order for them to recover their losses. The government had pressed OGRA to increase the benchmark, the source said.
However, the real reason for the tariff increase was to allow gas companies to meet the expenditures of the natural gas supply schemes of parliamentarians under the Prime Minister’s People’s Works Programme. The parliamentarians have been demanding completion of gas supply schemes in their constituencies even though there is an extreme shortage of gas in the country. The Sui companies are interested in expanding their infrastructure, which allows them a return of 17.5 percent per year and to meet extra expenditure occurring because of the re-induction of 7,000 terminated employees.
