Milking the consumer

According to a report Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbassi is scheduled to chair a meeting of senior officials of Oil and Gas Regulatory Authority (Ogra) and gas companies to finalise recommendations to increase the benchmark for unaccounted for gas (UfG). There are a number of reasons for UfG that are experienced by all gas producing/supplying countries which include leakages, discrepancies due to meter inaccuracies, variations of temperature and/or pressure, as well as other variants including measurements at different times. Efforts are afoot in several Western countries to reduce the UfG. However, there is an internationally acceptable rate of UfG premised on technical/seasonal issues relating to UfG and research is afoot to reduce UfG that is compromising gas company/government revenues.
Is there a justification for raising the UfG benchmark in Pakistan? In this context it is essential to note that the general perception in Pakistan is that UfG is largely if not exclusively due to inefficiencies and incompetence on the part of the two companies, and a significant client base engaged in stealing gas through illegal connections. To add to this is the perception that the government of the day uses extending gas connections to certain constituencies for obvious political gains at a time when there is no economic rationale for extending the supply chain given the rising gap between demand and supply. If the matter was only one of inefficiency peculiar to Pakistan, and there are many in this country who would maintain that this is precisely the case, then one would be compelled not to support the request for granting a rise in UfG. Or, as has become usual in this country, compelling existing paying clients of the two gas companies to pay more through a rise in the utilities' per unit cost, to cover the losses due to UfG.
The Sui Southern Gas Company Ltd (SSGCL) Chairman Zuhair Siddiqui in a statement issued last year, however, argued that it was unfair to blame the gas companies for not limiting UfG as the country is experiencing severe law and order issues in certain areas where the writ of the government does not prevail. Going into such areas even with the support of law enforcement agencies led to violence being perpetrated against gas company staff, he added and gave the example of Balochistan that consumes nine percent of SSGC's total gas supply and is responsible for three percent of the company's total UfG. "We are facing two big issues - shortage of gas and gas losses. The shortage is due to depleting gas fields as the gas demand continues to increase. We recently found as many as six illegal gas connections supplying gas to several residential areas that we had not as yet given connections to," Siddiqui revealed.
In Pakistan the existing rate for UfG is 7 percent but neither the Sui Northern nor the Sui Southern Gas Company Ltd has been able to achieve the target and the two have, yet again, requested an increase in the UfG. However, sources indicate that the two gas companies have succeeded in reducing UfG from 11 percent to 9 percent. Ogra, which was responsible for setting the UfG benchmark to-date, has sought government intervention to set the UfG benchmark for the first time ever. Or in other words, Ogra feels that there is a need for the government to provide policy guidelines on how to deal with not only the gas pilferers but also gas lost due to law and order problems. Although this tantamount to surrender of autonomy on the part of the regulator namely Ogra but the Tauqir Sadiq (former Ogra Chairman) scam under probe by NAB may well be the cause of such surrender. While one does appreciate Ogra's concern and can support this yet it is necessary for the government to set a different benchmark for different reasons for UfG or in other words say a 1.5 percent UfG for law and order issues and not a blanket increase that would also cover areas where the poor law and order conditions do not prevent recovery of dues.