Senate body opposes proposed weight average price formula

A parliamentary panel on Tuesday opposed the federal government move to introduce a weighted average price formula (RLNG and indigenous gas) for three gas producing provinces, and also recommended a special dispensation energy package for Balochistan.

Senate Standing Committee on Petroleum met under the chair of Senator Mohsin Aziz.

The committee chair said that a uniform gas tariff would only benefit Punjab and adds to the miseries of already deprived provinces of Sindh, Balochistan

and the Khyber-Pakhtunkhwa.

"Proposed weighted average price formula will hurt the economies of the three provinces," Aziz said.

Petroleum Division Secretary Mian Asad Hayaud Din informed the committee members that a uniform gas tariff system was inevitable for the country as indigenous gas reserves were depleting at around 10 percent annually.

The pricing of RLNG was treated under ring-fenced arrangement, which was not sustainable.

He also criticised the decision of the last Government of Pakistan Muslim League-Nawaz (PML-N) of keeping the RLNG under petroleum products to avoid lengthy process of amendments in the OGRA Ordinance, and approval from Council of Common Interest (CCI).

Under a political decision, the secretary said, "RLNG has been treated as a petroleum product and its pricing can be carried out in line with the prevailing practice for petrol/diesel pricing on [a] monthly basis."

The secretary further maintained that the government of Sindh had two different stances on provision of RLNG to fill the demand-supply gap.

The provincial government was claiming its share in RLNG's transmission and distribution network but was also opposing to end present RLNG ring fenced arrangements.

Hayaud Din argued that there must be a uniform gas tariff instead of four different prices of one commodity (gas).

Refuting the apprehension that mixing of RLNG and indigenous gas may increase domestic gas consumers, OGRA Chairperson Uzma Adil stated that the federal government had an option to adjust tariff for any consumer category falling under the gas slabs.

She further explained that the average gas bill would be around Rs1,185 after implementation of weighted average gas price formula less than last category of domestic consumers who were currently paying Rs1,460.

Adil further said that the oil and gas regulatory authority would not accept any amendment in the OGRA Ordinance with reference to abolishing ring fence arrangement on RLNG as petroleum product until the federal government got approval from the CCI.

Responding to questions regarding ongoing project of installation of 30 LPG AirMix plants for the smooth supply of gas to Balochistan, Secretary Hayaud Din said that the matter would be taken to the Economic Coordination Committee (ECC) as it required Rs16 billion annual subsidy.

He said that it would not be viable until the Balochistan government agreed to subsidize the gas price for the province.

The secretary said the end consumer might receive a gas bill of Rs31,000 annually as compared with LPG domestic user who consumed Rs19,000 worth LPG per annum.

He said the LPG Air Mix plant would cost Rs 4,600 mmcfd. Hayaud Din said Air Mix plants would cost Rs34 billion annually.

Out of a total of 48 Air Mix plants, 32 were located in areas covered under the Sui Northern Gas Pipeline Limited (SNGPL) and the rest 19 fell in the area of the Sui Southern Gas Company (SSGC).

The SNGPL managing director said that the board approved installation of 10 Air Mix plants and acquiring land was in progress. He said that despite recalling bidding several times, no interesting party was participating in the bidding process.

The senators belonging to Balochistan criticised the federal government for "misguiding" the members on installation of 30 LPG Air Mix plants in the province.

Senator Usman Kakar said that the senators were informed that Rs14 billion was allocated for installation of 30 Air Mix plants in the province three years ago and tendering process was also initiated.

He said that it was misguiding the members, as Petroleum Division was now claiming that the business model of LPG Air Mix plants was not cost effective for consumers.

Senator Jehanzeb Jamaldini suggested that the province did not need

any Air Mix plant or system gas.

The federal government should direct the relevant companies to provide gas from the recently discovered wells in Balochistan.

Senator Sherry Rehman expressed her displeasure over absence of Minister for Energy Omar Ayub from the proceedings of the committee and walked out. She wanted to draw the attention of the committee members towards the shortage of natural gas in Sindh and the violation of Article 158 of the Constitution.

Rehman claimed that the government was not taking parliamentary committees seriously. She argued the meeting of the committee should be deferred if minister for petroleum was not available.

Rehman claimed that no response was received from the government side regarding gas shortage in the province producing 70 percent gas of the country.