KARACHI, May 9: Sui Southern Gas Company consumers fiercely opposed the gas utility’s petition for a rise of Rs20.75 per million British Thermal Unit in the prescribed price of natural gas at a public hearing organized by the Oil and Gas Regulatory Authority (OGRA) here on Friday.

The SSGC filed an application, entitled “Petition for revenue requirement for the fiscal year 2003-2004,” on March 26 with the gas regulators under section 8 (1) of the Oil and Gas Regulatory Authority Ordinance 2002 seeking the tariff rise “mainly due to change in estimated well-head gas prices with effect from July 1, 2003.”

The application sought the increase in SSGC’s prescribed price on the plea that it “will enable the company a 17 per cent return on average net fixed assets in accordance with the requirement of Asian Development Bank’s loan covenants.”

The SSGC consumers said the revenue of the gas utility had fallen short of its total operating cost because of unproductive administrative expenses, irrational overhead expenses and non-realization of billions of rupees from government departments. “An increase of even a fraction in the tariff will not have a great impact on the gas company, but it will be a net loss to the industries of the country which will result in a drop in exports, so it will deprive the country of the much-needed foreign exchange,” they said.

The consumers severely criticized the gas utility for ensuring a 17 per cent return on average net fixed assets in accordance with the requirements of the Asian Development Bank’s loan covenants. “The approach of the SSGC does not appear to be rational under the present economic circumstances, obtaining both locally and internationally. In fact the ADB loan carries the interest rate of only 14.5 per cent, but the foreign exchange risk coverage fee in addition to commitment charges and government of Pakistan guarantee fee work out to be more than 20 per cent.”

Speaking about the inordinately high well-head gas prices, the SSGC consumers pointed out that they constituted almost 80 per cent of the gas selling price. “It is only too natural for a government to get international companies undertake oil and gas exploration ventures in the country, but no government can afford to pay such high well-head prices,” they said.

The SSGC consumers wondered that if OGRA had no control over the well-head prices (a price based on exploration and production), which were determined by the government. What the entire debate was about?

They referred to a table in the SSGC’s petition which shows that during 2002-2003 while the SSGC bought natural gas at Rs32.28 per million British Thermal Unit from Sui, it bought natural gas at Rs197.23 per million British Thermal Unit from Kandanwari. “It is beyond our comprehension why during 2003- 2004 the SSGC is willing to buy natural gas from Sui at Rs37.84 per million British Thermal Unit but wants to buy natural gas at Rs227.56 per million British Thermal Unit from Kandanwari,” they argued.

They suggested, not in so many words, that behind-the-scene deals were responsible for such anomalies in agreements pertaining to gas.

The SSGC consumers said it was strange that the gas regulators were doing nothing to ensure that the transmission and distribution losses, known as unaccounted-for gas in technical parlance, did not go up. They added that OGRA should penalize the SSGC for failing to check the losses.

They said high power tariff was responsible for widespread electricity theft. “If the SSGC continues to increase gas tariff at this rate, the pilferage of gas will also increase in a big way,” they expressed the view.

Apart from giving a presentation on their performance, top-ranking SSGC officials responded to the comments of interveners. They said some objections raised by the interveners pertained to government policy over which the gas utility had no control.

The OGRA chairman, Munir Ahmad, said the gas regulatory body was limited in function by the relevant ordinance which allowed it no control over the well-head prices which were determined by the government. “Similarly, subsidy offered by the SSGC to the fertilizer sector and domestic consumers, which has been opposed in this hearing, are government policy decisions over which we have no control. But we can put forward suggestion to the government.”

Responding to a comment made by an intervener, he said OGRA had the infrastructure in place to check the veracity of claims made by the SSGC, particularly about unaccounted-for gas.

He said OGRA would soon announce a decision about the gas tariff.

The Jamshoro Power Company, SITE Association of Industry, Consumer Rights Commission of Pakistan, All Pakistan Textile Mills Association, Mushtaq and Company, Consumer Protection Council and Karachi Electric Supply Corporation took part in the hearing as interveners.

Political parties, which claim to clamour for the interests of the people, were conspicuous by their absence.