August 9, 2002	Friday	Jamadi-ul-Awwal 29,1423

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ISLAMABAD, Aug 8: The Oil and Gas Regulatory Authority (Ogra) has increased the prescribed price of gas supplied by Sui Northern Gas Pipelines Limited (SNGPL) by Rs7.13 per thousand cubic feet (MCF) or 6.5 per cent with effect from July 1, 2001.

The government would advise Ogra within 40 days about the price increase required for various consumer classes to meet its annual target of Rs15 billion gas development surcharge, Ogra Chairman Munir Ahmad told a news conference on Thursday.

The SNGPL had demanded Rs8.61 per MCF increase in its prescribed price to meet its revenue shortfall of Rs2.744 billion for 2001-02. Ogra held that shortfall for the year was only Rs2.272 billion.

As per covenants with the World Bank and the International Monetary Fund and a federal cabinet decision of Feb 28, the government is required to increase gas prices on biannual basis.

Under the decision, the government would revise gas prices on Sept 1. The previous gas increase of around 14 per cent was announced in the first week of March. On the whole, the government had announced to increase gas prices by up to 140 per cent in three years to eliminate cross-subsidies and for the successful privatization of Pakistan Petroleum Limited.

Under Ogra Ordinance 2002, the authority is required to notify tariffs in the gazette on the advice of the government to ensure at least 17.5 per cent rate of return on assets to the SNGPL and Rs15 billion GDS to the government for 2001-02.

The Ogra chairman explained that the current prescribed price determination was only meant for the year 2001-02 and the SNGPL would have to file another petition later for the fixation of rates for 2002-03.

He insisted that the government had already signed agreements with the gas producers for a long term (10-15 years) and Ogra was required to only notify the prices but had no powers or jurisdiction to fix or comment on those.

He admitted that Ogra was not as powerful as National Electric Power Regulatory Authority under the law to determine final gas sale prices to consumers and it should not be expected to cross its legal limits.

Ogra disallowed the SNGPL’s request to treat Rs71 million as part of its sale proceeds for liquefied petroleum gas business as non-operating expenditure and instead added this amount to the operating revenue.

It rejected the provision of Rs150m on account of its agreement under negotiation with the collective bargaining agent union and directed the SNGPL management to conclude the agreement on the basis of performance and output of the staff and reduction in overtime and medical expenditure.

It disallowed provision for doubtful debts amounting to Rs123m out of a total of Rs251m.

The SNGPL was directed to progressively reduce the line losses to six per cent in three years from the existing rate of 8.13 per cent.

In future, the company would be required to seek prior approval of Ogra on the question of prudence of capital expenditure and provide detailed justification of various additions to the asset base. Asked why the rates for Sui Southern Gas Company were reduced and those for the SNGPL were increased, the Ogra chairman said the SNGPL had a larger system than the SSGC and various parameters of the two companies were different.

The SNGPL provides gas in Punjab, the NWFP, Islamabad and parts of Azad Kashmir.