THURSDAY OCTOBER 25: Supreme Court questions Ogra formula: SNGPL, SSGCL chiefs issued notices

ISLAMABAD: The Supreme Court on Wednesday questioned the formula under which Oil and Gas Regulatory Authority (Ogra) linked the price of domestic Compressed Natural Gas (CNG) with imported petrol on a weekly basis. Issuing notices to Managing Directors of Sui-Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) in oil pricing case, a two-judge bench of Chief Justice Iftikhar Muhammad Chaudhry and Justice Jawwad S Khawaja sought from Chairman Ogra Saeed Ahmed Khan a report on the formula used for gas pricing.
Chief Justice Chaudhry observed that the linkage of the price of imported petrol with the dollar was understandable. However, CNG is domestically produced. He, therefore, questioned its linkage with the price of imported petrol. Chairman Ogra Saeed Ahmed Khan told the court that tariff was determined by OGRA subsequent to submission of a tariff petition by SNGPL and SSGCL twice a year (July and January). The Chief Justice observed that in that case tariff for the consumers should also be determined biannually instead of on a weekly basis. According to the Chief Justice, Ogra is a regulatory body and as such it should not be influenced by either the government or the court in the discharge of its function. The Chief Justice further observed that there must be a mechanism under which OGRA should implement its policies as a regulator and should ensure the interests of consumers.
The Chief Justice queried as to which factor had increased the cost of the operation that necessitated an increase in the CNG price; and instructed the Ogra Chairman to submit within two hours the tariff chart from August 15 to date explaining the factors that led to an increase in the price of CNG and petroleum.
The Ogra chairman returned with details of the tariff chart. According to him, petroleum prices are not completely deregulated and Ogra merely determines price of kerosene. He added that per barrel cost of crude was $118.2 on August 15 or Rs 77.9 per litre on 1 August 2012. According to him, more than 90 percent of the oil imports are undertaken by Pakistan State Oil (PSO) whereas OGRA acts as a monitor of petrol price.
Chairman Ogra also informed the court that gas price for consumers could be determined biannually. To which, the Chief Justice queried how the Authority would compensate the consumers for the weekly raise in tariffs paid so far. Secretary Petroleum Waqar Masud informed the court that there was also a component of Gas Development Infrastructure Cess in the gas tariff while the price of petrol was determined by the bill of lading and failing that it is determined by the international price directory.
PSO Managing Director informed the court that the demand for petrol is 6 million tonnes per year from which one million tonnes was imported from Kuwait. According to him, the government pays PSO Rs 1.76 per litre as service charge for diesel imports. He added that PSO was attempting to forge long-term relations with an oil producer directly. The hearing was adjourned till 25th October (today).