Provinces may forgo billions to bail out gas companies

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ISLAMABAD: The four provincial governments may be asked to surrender billions of rupees they earn in gas development surcharge (GDS) and agree to an increase in gas tariff for all categories of consumers to bail out two gas utilities — SSGC and SNGPL. A government official told Dawn that a meeting, presided over by Petroleum Minister Shahid Khaqan Abbasi, was informed that financial and technical affairs of the two companies had reached such a dismal stage that the government might not rescue them alone.

As the difference in gas tariff of the two companies or the difference between the prescribed and consumer prices was a source of the GDS shared by the provinces as their revenue item, any change in the prices will affect provincial revenues and hence required their support. In the fiscal 2012-13, the provinces earned a GDS of about Rs32 billion.

The provinces’ consent in this regard is needed also because due to the constitutional changes, decision-making on policy advice to the regulator for tariff and other regulatory issues have been shifted from the federal cabinet and its Economic Coordination Committee to the Council of Common Interests (CCI) where the provinces have a greater say.

On top of that, since gas prices are to affect consumers across the country, a broad policy decision has to be taken jointly by the centre and the provinces. Therefore, it has been decided to hold a series of meetings to reach a conclusion if the Oil and Gas Regulatory Authority (Ogra) fails to play its due role.

The meeting was told that because of stay orders obtained by their managements, the two utilities could not get approval of their revenue requirements by Ogra for three fiscal years and were on the brink of financial collapse.

The managing directors of the two companies are being paid about Rs2-million monthly salary each, besides other perks and privileges. Some members of their boards of directors travel as far as London and Calgary to attend board meetings at the expense of the companies.

The companies could not get approval from the regulator for final revenue requirements for 2012-13, interim revenue requirement for 2013-14 and estimated revenue requirements for 2014-15.

The consumers are charged at a rate notified on Jan 1, 2013 even though the rates should have been notified again on July 1, 2013 and then on Jan 1, 2014 as required by the law. Another notification will become due on July 1.

The meeting discussed bulk-retail ratio of consumers, gas lost due to law and order problem, non-recovery of bills in restive areas, permission for charging a minimum bill even in cases where no gas was consumed and for small gas quantities in the pipeline system, theft, leakage and unaccounted for gas.

The meeting was told that Ogra should play a proactive role to resolve the issues instead of forcing the ministry to seek the help of the cabinet which might not be the authorised forum in the matter.

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