Muhammad Nisar Shekhani, Chairman, Site Association of Industry (SAI), pleaded before Oil and Gas Regulatory Authority (Ogra) that petition filed by Sui Southern Gas Company (SSGC) for increase in gas tariff must be rejected in toto.
Pleading case of industries before Ogra meeting held recently to consider SSGC petition, he said that the SSGC has done a fine job of manipulating and juggling with figures in the accounts to make their petition palatable before this authority.
In their stated pursuit, they have even ignored the directives given by this body that can, at best, be described as an affront to Ogra chairman and members of this august body,
He pleaded that the increase in price of gas at wellhead should also be within the purview of Ogra since this is the authority that regulates all matters of oil and gas.
The second point of 17 percent return on average fixed assets of SSGC, though providing a platform for expansion of the activities of SSGCL, is also taken as a boon for the management cadre of SSGC.
Examine the accounts and projections as submitted by SSGC, he said:
1. UNACCOUNTED FOR GAS (UFG): Ogra issued directions to SSGCL and SNGPL on UFG as under, and I Quote: "Progressively reduce UFG to below 6 percent within 3 years, starting financial year 2002-03". In the financial year 2003-04 SSGC projected 6.5 percent as UFG but the revised estimates showing 7.57 percent.
During the presentation by SSGC before Ogra, Syed Hassan Nawab, Sr General Manger, Management Services, SSGC, contended that plans were afoot to bring down the UFG and, in subsequent years, the conditionalities set out by Ogra would be made.
In the petition under review for financial year 2004-05, the UFG is again projected at 7.5 percent in utter disregard and an affront to the Ogra directives to bring it to below 6 percent during the year of the petition under review.
It is imperative that Ogra must exercise its authority and disallow at least 1.5 percent of UFG. This step would certainly help and spur SSGCL to implement the directives of the Authority.
2. GROSS SALES AND COST OF SALES: SSGCL has always under projected the cost of sales to offset whatever relief/benefits Ogra passes on to the gas consumers.
In this instance, he submitted the figures (both) determined and revised estimates of financial year 2003-04.
Gross sales during the financial year were projected/determined at Rs 51,011.605 million, which were later revised to Rs 53,008.675 million.
The revised estimates show and increase of Rs 1,997.07 million or we can say nearly two billion. During the same period the cost of gas was projected/determined at Rs 36,829.470 million whereas the revised estimates show cost of gas to be Rs 37,957.988, thus showing an increase of only 1,285.518 million.
Another interesting fact that emerges from the projected and revised estimates for financial year 2003-04 is the percentage of cost of gas to gross sales. In the projected figure the percentage of cost of gas to gross comes to 72.20 percent whereas on revised estimates the percentage comes to 71.60 percent.
When he said he examines the projected figures for financial years 2004-05 we find that gross sales are projected at Rs 55,860.116 million, which, when compared with the projected figures of the previous financial year (2003-04), is higher by 9.50 percent, whereas the cost of gas is projected at Rs 44,038.582 during the financial year 2003-04, that works out to be higher by 19.502 percent.
Furthermore, when we determine the percentage of cost of gas to gross sales during the financial year 2004-05 we find it works out to be 78.83 percent. As explained earlier, the increase in price of gas at well-head is the reason for the petition on hand.
Keeping in view the past practice of SSGCL, we can safely say that when Revised Estimates are submitted, the gross sales will increase by 10 percent if not more.
3. TRANSMISSION AND DISTRIBUTION COST: Interestingly the single most head of account to increase in revised estimate is, as per tradition, salary, wages and benefits, which have increased by 477.520 million or 19.80 percent higher than the projected value during financial year 2003-04.
It is on record that this Association had taken exception to the high rate of projected increase in this single head when the petition of SSGCL was last heard before this Authority.
The projection for financial year 2004-05 under T&D costs are made at Rs 4,724.377 million, which, when compared with the projection of the preceding year, shows an increase of Rs 1,071.046 million or 29.32 percent and if you consider the revised estimates of the preceding years it still shows an increase of 527.015 million or 12.56 percent.
Gross sales 9.50 percent, cost of gas 19.52 percent, T&D costs 29.32 percent, salaries, measures, etc 28.82 percent.
It is quite evident that the SSGCL management is taking full advantage of the controversial ADB covenant of 17 percent return on average net assets, with 28.82 percent increase (modified to 27.2 percent in the presentation today) under the head of salaries, wages, and benefits.
With the historical pattern set by the authorities of SSGCL over the years and the lower projection for gross sales of financial year 2004-05, it is feared that there will be another increase of at least 20 percent in T&D cost and, most specifically, in salaries and benefits.
Factual position must be based on real statistics, logic, reasoning and International Accounting System. Reality must prevail.
4. PROVISIONS FOR DOUBTFUL DEBTS: In the financial year 2002-03 doubtful debts were shown at Rs 212.000 million which Ogra statistic to Rs 168.000 million has been too excess. During the financial year 2003-04 again Rs 212.000 million were projected (it seems to be the lucky number of SSGCL) but revised estimates put the figure at Rs 365.628.
That means an increase of Rs 153.628 million that works out to be an increase by 72.47 percent. In the financial year 2004-05 provision for doubtful debts is still a larger number and made at Rs 464.255 million, ie an increase of 218 percent compared with the projected provision for the financial year 2003-04.
The members of Ogra are requested not to let SSGCL sink into an abyss.
5. TOTAL INVESTMENT AND CORE-INVESTMENT PLAN: In the financial year 2004-05, total investment is envisaged at Rs 6,784.000 million and the core-investment during the financial year is envisaged at Rs 6,558.000 million compared with the immediate preceding financial year.
This is 68.8 percent higher and certainly not commensurate with the increase in projected sales of gas during the year under review.
6. QUALITY OF GAS: In "Notification of Complaint Resolution Procedure Regulation" issued by Ogra and defined in "performance and service standard regulations", it is made mandatory on SSGCL and SNGPL "for maintaining quality of gas, and consumers satisfaction".
He lamented that neither the quality of gas is maintained nor is the satisfaction of the consumer looked after.
The quality of gas continues to deteriorate with lower BTU and higher content of air in the flow of gas.
For optimum operation it is important that the heating value of gas should be maintained to form a predetermined mixture of air and gas for complete combustion.
Furthermore, sometimes the heating value of gas is so low that generators of captive power plants in large industries keep tripping, depriving the consumers of production and thereby raising the cost of goods produced.
In some cases and in certain machines and boiler burners, they burn larger quantity of gases leading to increased billing.
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