ISLAMABAD, Aug 5: The Oil and Gas Regulatory Authority (Ogra) is expected to announce here on Tuesday around 35 paisa per thousand cubic feet (MCF) increase in the prescribed price of Sui Southern Gas Company Limited (SSGCL), informed sources told Dawn.
The SSGCL had demanded around Rs5.11 MCF increase in its prescribed price through a petition but was strongly opposed by all the consumer groups at the public hearing. The SSGCL is supplying gas to consumers in most of Sindh and Balochistan.
The Ogra would submit its determination to the federal government for notification on Tuesday. Ogra chairman Munir Ahmad would explain its salient features at a news conference the same day.
This would be the first-ever tariff determination of Ogra since its inception around two years ago. The public hearing of the SSGCL’s petition took place on July 26 and the Ogra had reserved its determination.
Under the Ogra Ordinance, 2002, Ogra is now required to determine prescribed price of oil and gas utilities once the deregulation process of the petroleum sector is completed by next year.
The public hearing on the tariff petition of Sui Northern Gas Pipelines Limited (SNGPL) had also concluded last week but its determination is expected by end of this week, the Ogra sources said.
The SSGCL had suggested that Rs5.11 per MCF increase was necessary with retrospective effect from July 1, 2001, to meet 17 per cent return on average net fixed assets required under the Asian Development Bank loan covenants.
The utility had also sought an additional Rs2.24 per MCF on account of profit of sale of liquefied petroleum gas (LPG) business in fiscal year 2000-01, treated as operating income.
The increase in prescribed price has no direct bearing on consumer prices but this will reduce the amount of gas development surcharge (GDS) collected by the federal government and the government could meet that shortfall through consumer prices.
Now that GDS has been made part of the divisible pool and is distributed among the provinces, the government could increase the consumer price to maintain a reasonable GDS level.
The Ogra would also set targets to be met by the gas utility, including reduction in gas losses, containing the operating costs, quality of service, proposed privatisation and outstanding receivables.
The price inclusive of wellhead price, transmission cost and utilities’ all expenditures and a guaranteed rate of return on assets is called prescribed price. The government then sets a consumer price on the basis of other factors, including taxes and duties.
Interesting to note is the fact that wellhead price payable by the gas utilities at all gasfields has already been fixed by the federal government and is calculated at 67 per cent of international crude oil price.
Around 140 per cent increase in consumer-end price payable to the utility has also been fixed by the federal cabinet for the next three years.
