Industrialists, traders and exporters have opposed the proposal of increasing the natural gas tariff describing it fatal for industry. The President, Multan Chambers of Commerce and Industry (MCCI), Khawaja Muhammad Jalaluddin Roomi said, Pakistani exporters are unable to compete in the world market due to increased cost of production.
He said that the government should stop the gas companies from increasing the tariff. The representatives of textile industries told the authority that such an exorbitant rate of increase, being sought by the petitioner, would not only ruin the entire industry but also leave a devastating effect on the daily life of ordinary consumers who would not be able to bear such a burden.
Furthermore, the tariff hike would have its own vicious circle that would push up prices of all items by the same rate. They demanded that the wellhead gas price mechanism be immediately changed, as it became a higher component in price determination.
The business community suggested that natural gas being indigenous fuel should not be linked with international prices of crude oil while line losses and operating cost of the company be reduced.
They drew the attention of the authority towards the provisions of OGRA ordinance, which made the authority responsible to protect the interest of all stakeholders and requested that while deciding on the revenue requirement, the interest of the industry should be kept in view.
The industry representatives strongly opposed the petition, saying Oil and Gas Regulatory Authority OGRA had already allowed an increase in gas prices and any further hike would have an adverse economic and financial impact on consumers. They said the cost of gas constituted about 25 per cent of the total manufacturing cost and a further rise would push up their total cost by almost 10 per cent, rendering them succumb to international competitors like Bangladesh who were getting gas at a much lower cost.
Even a fraction of increase in the tariff might not be of major help to the gas company would indeed be a net loss to the textile industry. Resultantly any fall in exports would deprive the country of much-needed foreign exchange apart from creating social ills like unemployment, law and order situation and general resentment.
OGRA sources said gas prices would likely be reviewed in May this year following the end of public hearings in all provinces of the country. Sources said a public hearing in Punjab, Sindh and Balochistan had been completed. However in the NWFP hearing is yet to be completed.
Sources also said that OGRA was determined to protect the rights of all stakeholders in accordance with the law and in the best interest of people. The petition was to review the SNGPL's revenue requirement for financial year 2008-09 was being heard by OGRA.
Managing Director, SNGPL made a detailed presentation and gave the reasons for demanding an increase in its revenue requirement. He also responded to a number of questions raised by professionals of OGRA and other participants.
Further, sources said that the SNGPL filed its petition on November 29, 2007 under Section 8(1) of OGRA Ordinance 2002 and Rule-4 (2) of Natural Gas Tariff Rules 2002 that was subsequently amended through a revised petition dated February 20, 2008.
The petition called for a review of the company's estimated revenue requirement/prescribed price for FY 2008-09 and requested for an increase of Rs 69.50 per million British thermal unit (MMBTU), in its average prescribed price from July1. In addition to that the SNGPL projected a shortfall of Rs 41, 514 million in its revenue requirement in 2008-09.
The main reason for seeking increase in the prescribed price, explained by the petitioner, was the projected rise in the cost of gas, which it paid to gas producers. The cost of gas is linked to the international price of crude oil in accordance with the agreements between the federal government and gas producers, maintained the SNGPL.