Allowable UFG benchmarks: Consultation process for cut initiated

The Petroleum Division has initiated a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalization of transmission and distribution costs to create some fiscal space for the companies instead of simply resorting to increase in tariffs.

The spokesperson for the Petroleum Division says that the division has actively engaged with all key stakeholders; the Oil and Gas Regulatory Authority (OGRA), the board of directors (BoD) and managements of the both the Sui companies - the Sui Northern Gas Pipeline Limited (SNGPL) and the Sui Southern Gas Company (SSGC) to come up with out-of-the box solutions to reduce the burden of high gas prices on the most vulnerable section of society.

Both gas companies are incurring gas losses in double digit, which far exceeds the best international practices. One percent UFG loss of both gas companies in monetary terms exceeds Rs 4 billion.

Hence, the government is asking gas companies to curtail UFG losses or reduce allowed UFG to ensure efficient use of gas. The incumbent government at the outset faced a tremendous challenge in the form of financial deficit of over Rs 150 billion accumulated by the two gas companies over a period of last five years.

The Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL) were forced by the successive governments to maintain low tariff for consumers especially domestic to get maximum political mileage. This artificial price management coupled with systemic inefficiencies has seriously undermined these public-sector enterprises to deliver sustainable and economically-viable services to the general public.

The prime minister after taking stock of the challenge, directed that the corporate bodies under the Petroleum Ministry must be administered as per best corporate governance principles. In line with this vision of the government, the boards of all the companies under the Petroleum Division were reconstituted and known industry professionals were inducted as members.

These boards were tasked to appoint best available professionals as MD/CEOs of the companies. The spokesperson adds that the Petroleum Division was working to instill new thinking in the way the companies' business was being run.

The Petroleum Division is taking necessary decisions to reinforce accountable' corporate governance, which discourages rent seeking and corruption and promotes value creation, resulting in improved service delivery for the end consumers.