Companies seek huge increases in gas tariff

Two gas utilities have sought Rs20.36 and Rs63.10 per unit increase in their prescribed prices with effect from July 1, to meet their revenue loss arising out of the government’s decision to increase excise duty on gas production by Rs5 per unit.

Informed sources told Dawn that the Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) had submitted their review petitions before the Oil and Gas Regulatory Authority. The ogra had not only rejected their petitions for tariff increase, but also reduced their prescribed prices by Rs4.53 per unit.

Ogra sources said that the regulator had received the two review petitions.

A petroleum ministry official said that Ogra was unlikely to accept the two review petitions, although it would be obligated to allow about Rs4.90 per unit increase on account of the rise in excise duty. The gas companies will probably be allowed to raise prices proportionate to the rise in excise duty, the official added.

The two companies have pleaded that because of the government’s decision to increase excise duty on wellhead prices, it would not be possible for them to pay for gas purchases from producers.

In the federal budget 2010-11, the government has raised the excise duty on natural gas from Rs5.09 at present to Rs10 per MMBTU. The decision will bring in an additional revenue of Rs7 billion. The money will go to Sindh in keeping with an understanding reached during negotiations for NFC award.

The government has already decided not to pass on an average Rs4.53 per unit reduction in natural gas tariff approved by Ogra to mop up Sindh government’s gas-related revenue loss under the National Finance Commission Award.

Ogra had decided on May 18 to reduce prices of natural gas by an average of 2.55 per cent, or Rs4.55 per unit, for all categories of consumers from July 1. A notification for maintaining gas rates is likely to be issued by next week.

Sindh had agreed during the NFC talks to allow Balochistan to have higher returns on gas produced from that province for the last few decades to address longstanding grievances of the people of Balochistan.

The Ogra’s May 18 determination said the prices of gas for domestic, commercial, industrial, CNG stations, fertiliser, cement and power generation would come down both for SNGPL and SSGCL.

The two gas utilities had sought an increase in tariff at the rate of Rs20.36 and Rs63.10 per million British thermal unit (MMBTU), respectively, but Ogra held that average tariff for both companies should be reduced by Rs4.53 per cent.

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