ISLAMABAD: Federal government has declined a request of gas companies- Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) for Rs22.52 billion cross-subsidy for LPG air mix supply to consumers in selected areas where natural gas is not available.

The two gas companies have been given the task to set up 30 liquefied petroleum gas (LPG) air mix plants to cater to domestic gas needs.

Sources maintained that the plants were aimed at providing gas facility to the population in the areas where it is not available and discouraging deforestation. At the plants, the LPG will be mixed with air to produce synthetic gas for onward supply to consumers through distribution networks like natural gas.

The gas company, SSGC has required Rs9.92 billion while SNGPL needs Rs12.60 billion cross-subsidy as LPG air mix tariff is much higher than the consumers of natural gas are paying.

In order to lessen cross-subsidy impact, the tariff for LPG air mix supply to consumers is Rs4,640 per million British thermal units (mmbtu) – which is even higher than the highest slab upto Rs1,460 for natural gas supply to domestic consumers.

Per unit generation cost for the SNGPL and the SSGC LPG-air mix plants was calculated at Rs4,640 respectively, which were much higher than the gas tariffs for domestic consumers who were paying Rs121 per mmbtu under the lowest slab and Rs1,460 per mmbtu under the highest slab.

Copyright Business Recorder, 2023