Sui Northern Gas Pipeline Limited (SNGPL) has sought reduction in gas tariff by 8.75 percent (Rs 22 per mmbtu) in line with the reduction in oil price in international market, effective from July 1, 2009. The sources revealed to the Business Recorder on Monday that Oil and Gas Regulatory Authority (Ogra) would conduct public hearing in Lahore to get consumers' opinion on Wednesday.
After the hearing, the Ogra will scrutinise all costs with the help of a team of professionals to announce the decision. The public hearing will be organised by the Ogra on a petition of the SNGPL for determination of its estimated revenue requirement/prescribed prices for the 2009-10 financial year effective from July 1. The team of SNGPL will make a detailed presentation during the public hearing and explain the rationale of the estimates of the capital and revenue expenditure for the 2009-10 financial year.
They will also respond to a number of questions raised by the professionals of Ogra and the participants, including investors from different industry. The gas prices in Pakistan are linked with international oil prices and rupee value against dollar.
According to the sources, in a petition submitted to the Ogra, the SNGPL has worked out the combined impact of reduced oil price in the international market and rupee-dollar parity by 8.75 percent or Rs 22 per million British thermal unit (mmbtu). Oil prices in the international market have declined to a considerable level from 147 dollars per barrel to over 50 dollars per barrel at present, but rupee value against dollar has not improved.
"The consumers might have seen better impact of reduced gas tariff if rupee value against dollar has been improved in the same fashion, the sources argued. The Ogra has already conducted public hearing in Karachi on Wednesday last regarding the petition, filed by Sui Southern Gas Company Limited (SSGCL) to reduce the gas tariff by Rs 24.09 per mmbtu in its average prescribed price effective from July 1.
Interveners at a public hearing, organised by the Ogra at Karachi termed the proposed reduction in gas price not sufficient to provide any meaningful relief to the consumers, keeping in view the reduction in oil prices in the international market. The government increased the gas price by 31 percent in the same period on July 1, 2008 when the crude oil price stood at 147 dollars per barrel in the international market.
The oil prices in the international market have witnessed record decline since the beginning of the current calendar year and consumers are hoping the decline in gas price in line with the reduction in oil prices in the international market. But the officials are of the view that rupee-dollar parity has absorbed the reduced impact of oil prices.
Therefore, the gas utilities have sought the reduction in gas tariff that is not sufficient. The government announced seven percent average gas tariff increase effective from January 1, 2009. The government distributed the approved gas tariff increase among the different consumers that ranged between 5-17 percent. The government passed on 10 percent hike in gas tariff rate to compressed natural gas (CNG) stations. The gas tariff hike for the commercial consumers and cement industry was six percent and 17 percent for private power projects (IPPs).