Gas prices: Upward revision to reduce shortfall of SNGPL, SSGCL, Senate body told

The federal government has been anticipated that upward revision of gas prices will help reduce the shortfall of both Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Pipeline Limited (SSGCL) from Rs 152 billion to Rs 58 billion in current financial year.
This was disclosed in a meeting of Senate Standing Committee on Petroleum on Monday. Senator Mohsin Aziz chaired the meeting which took up the matter of proposed 186 percent increase in gas prices.
The committee was informed that the increase was inevitable to save the Oil and Gas Development Company (OGDCL), Pakistan Petroleum Limited (PPL) and the gas utility companies from increasing circular debt.
The upward price revision, however, will impact 85 percent domestic consumers in winter when the gas bill will go up significantly upon usage exceeding 200 cubic metres.
In the current financial year, the revenue requirements of SNGPL and SSGCL have been determined by Oil and Gas Regulatory Authority (OGRA) as Rs 275 billion and Rs 211 billion respectively.
At current gas sale prices, revenues of Rs 172 billion for SNGPL and Rs 157 billion for SSGCL will be generated, resulting in a revenue shortfall of Rs 102 billion for SNGPL and Rs 54 billion for SSGCL for current financial year.
An official of Ministry of Petroleum informed the committee for SNGPL and OGRA recommended 30 percent increase in gas sale prices for all categories of consumers except domestic sector where an increase of 186 percent was recommended. The suggested increase in domestic sector tariff depicts 50 percent cost recovery for first slab and 100 percent cost recovery from second slab which appears to be a rational suggestion.
For SSGC varying percentage of increases has been suggested by OGRA. However, as the government is following a policy of uniform gas sale prices across the country, it may be expedient to adopt the prices recommended by OGRA for SNGPL for all consumers across the country.
The committee was informed that the government has introduced new slabs to provide safeguards to the poor.
The managing director SNGPL informed the committee that the gas company is not running into losses but in last two years the dollar rupee parity and increased global fuel prices affected the financial health of the company.
He maintained that SSGCL and SNGPL are selling gas at a sale price which was lower than their prescribed price. This situation caused an unprecedented revenue shortfall of both companies since the sale price of natural gas had been revised in the last five years in line with the revenue requirements.
In addition, he said that SNGPL's finance has further worsened due to settlement of two old disputes in courts, putting additional burden of about Rs 60 billion on cash flows overnight. The gas company suffered a financial impact of Rs 35 billion on account of a dispute on Tal Block that remained under arbitration between 2010 and 2017. Likewise, another Rs 25 billion burden was caused by a two-year (2015-17) dispute over the Sui gas field that went against the SNGPL. A total of Rs 60 billion have been paid overnight.
Senator Mian Muhammad Ateeq Shaikh raised the issue regarding sending of four gas bills in one month to the consumers of Rawalpindi by SNGPL.
The managing director SNGPL informed the committee that SNGPL has reported that in light of the shortage of natural gas in Pakistan, the government decided to import LNG to meet local requirements under long-term contracts with LNG suppliers. As per terms of these contracts, payments to the supplier are to be made cargo-wise.
In order to be able to discharge upstream payment obligations, provision of weekly billing with the downstream consumers was inevitable and therefore, arrangements were agreed with all RLNG consumers accordingly. "As such weekly billing to downstream consumers is per the gas supply agreements executed by the consumers."
Senator Ateeq claimed that it was illegal as no public hearing was conducted by OGRA regarding the billing.
The members of the committee will also visit Balochistan in November or December to hold meetings with provincial government regarding accidental compensation to the coal mines workers.
The DG (mining), Ministry of Petroleum, said that it was a provincial subject and a proposal was under consideration to revise the accidental compensation to Rs 0.5 million from current rate of Rs 0.2 million.