Tariff for idle capacity of pipelines: Textile, CNG industries oppose SNGPL gas pricing formula

ISLAMABAD: The textile and CNG industries have opposed a gas pricing formula suggested by the Sui Northern Gas Pipeline Limited (SNGPL) to charge tariff for idle capacity of pipelines. The gas company has the idle capacity due to shortage of gas in the system.

Pakistan Tehreek-e-Insaf (PTI) government announced to allocate idle capacity to private sector for full utilisation of pipeline, in a bid to overcome gas crisis. However, the officials of the SNGPL, in a public hearing conducted on Thursday sought permission from the Oil and Gas Regulatory Authority (Ogra) to link gas tariff with throughput rather than designed capacity of pipeline.

The gas companies are operating on guaranteed rate of return gas pricing formula. However, the regulator allowed rate of return based on utilisation of pipeline in line with gas volumes.

In its petition for Review Estimated Revenue Requirement (RERR) for year 2021 and previous year 2018-2019, the SNGPL asked to amend the tariff based on full capacity of pipeline irrespective of gas volumes.

In his arguments, Managing Director SNGPL Aamir Tufail, citing an example of proposed North South Gas Project of 1.6 bcf gas from Russia, said the consumer would not receive gas with the inauguration or start of the pipeline according with the full capacity of the pipeline but it would take time.

The gas company asked to amend the idle capacity of pipeline rather than allocating it to the private sector to utilise it, which is against the policy decision of the federal government to allow private sector to market imported gas.

As many as 35 interveners attended the hearing but no one filed any written comments for the consideration of the OGRA against the petition of the SNGPL. An intervener, Ghayas Paracha, chairman CNG Association, opposed the proposal of new gas pricing formula proposed by the SNGPL during public hearing.

He said the SNGPL should follow the decisions of the Ogra and the government to reduce the prices of gas.

"The SNGPL moves a petition to seek increase in gas tariff after every six months on different accounts and when there is time of reducing gas tariff, SNGPL starts claiming revenue shortfall on account of outstanding," he commented.

He maintained that it was unfair to put burden of domestic consumers heavily subsidised on sectors like CNG, which was already running on expensive RLNG. Other sectors such as fertiliser and export-oriented, he said were already receiving subsidised gas tariff but CNG sector was badly hit due to increase in gas prices.

He said gas companies were not reducing the 11 to 17 percent UFG and the regulator should look into it. He said CNG sector should not be burdened more that was already affected due to using expensive gas. He further said that expenditure on human resource should also be reduced. Shahid Sattar representing APTMA, Islamabad, also questioned the proposed charge of tariff for idle capacity of pipeline.

He further criticised that company was seeking to link tariff with throughput rather than designed capacity of pipeline. Former member Ministry of Planning maintained that throughput could vary and company responsibility was to arrange supply of gas.

There was no justification of 100 per cent capacity allocation, he added. He urged that consumers were already paying double tariff on account of RLNG expansion debt servicing, rate of return on assets.

He also opposed a proposal of seeking 300,000 new gas connections. He said there was no gas available for existing consumers. He added that expansion of system was totally un-economic, and warned the company's situation would further aggravate. The SNGPL requested the regulator to allow 0.3 million gas connections. The regulator has already allowed 0.4 million gas connections for the ongoing financial year.

The SNGPL also sought approval of 0.3 million additional gas connections in a public hearing conducted here. The SNGPL officials said the company had 2.7 million pending applications for new gas connections. They further said that applicant got gas connection after three years due to higher pendency of cases.

They said that additional gas connections would help reduce burden of pendency regarding gas connections and also a socio-economic agenda of the federal government. The company management also sought implementation of increase in meter rent from Rs20 to Rs40.

The Economic Coordination Committee (ECC) had already approved increase in meter rent. The SNGPL management said that company had borrowed loans from commercial banks to build pipeline. The company had to pay Rs35 billion outstanding to banks so far. The company has also stuck its Rs40 billion in various court cases in Supreme Court, the Lahore High Court, and the Sindh High Court.

The official of the SNPGL said it was facing revenue shortfall of Rs35.5 billion on sale of on indigenous gas in financial year 2020-2021. It also required Rs21 billion accumulated shortfall of previous year. The company said it was seeking revenue of Rs29 billion on cost of LNG supply.

The officials of the company said that major reason for increase in gas sale prices, were exchange rate and prices of crude oil. The company further said the Ogra had disallowed some benchmarks in human resource. It sought to review the allowance of HR bench mark as per given in 2016 decision of the Ogra.

It said they had still shortage of 3,500 employees as per the study of a firm. The gas company also sought Rs136 million to complete the ongoing project in Karak (KP) where Ufg is at the highest level. The company will also complete the 40mmcfd gas to newly-notified Allama Iqbal special economic zone.

Copyright Business Recorder, 2020