July 31, 2003	Thursday	Jumadi-ul-Awwal 30, 1424

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ISLAMABAD, July 30: The government has decided to subsidize natural gas consumer tariff in Sindh and Balochistan that was projected to increase by 18 per cent due to costly gas supplies from new gas fields, to maintain a uniform rate throughout the country.

Sources told Dawn the supply from new gas fields, linked with international oil price, mostly goes to the Sui Southern Gas Company (SSGCL) while old fields like Sui have lower production cost and provide gas to Sui Northern Gas Pipeline (SNGPL).

However, the subsidy would be provided by the SNGPL to SSGCL through payment of a certain amount to meet the differential between the consumer tariff of both utilities.

Petroleum Secretary Mohammad Abdullah Yousaf told this reporter that a decision had been taken by the Economic Coordination Committee (ECC) of the cabinet under which the SNGPL would share the tariff differential with the SSGCL.

“The issue is now settled and all the provinces would be treated as equals in terms of gas tariff,” he said. The Oil and Gas Regulatory Authority (Ogra) would determine the quantum of tariff difference and then distribute the amount between the two utilities on equal basis, said another official.

The petroleum ministry had informed the ECC that the difference between the prescribed prices of two utilities was so high that when calculated on actual basis, the sale price of the natural gas supplied by the SSGCL would be higher by ten times compared to that of the SNGPL.

As such the consumers in Sindh and Balochistan would have been at a disadvantage because their tariff was becoming ten times higher when compared with the tariff the consumers in Punjab and the NWFP pay, although major gas fields supplying them were situated in Balochistan and Sindh.

The government was informed that the situation could create public unrest and law and order problems in Sindh and Balochistan.

Last month, the Ogra had recommended an increase of Rs20.75 per MMBTU (Million British Thermal Unit) in the prescribed price of the SSGCL and Rs2.22 per MMBTU in the case of the SNGPL.

The reason of difference in the increase of prescribed prices was the difference in the cost of gas purchase per unit by the two utility companies. The cost of gas purchase constitutes more than 80 per cent of the total prescribed price of the two companies.

“Under the circumstances the prescribed price of the SSGCL’s consumers may exceed their existing sale price by 16-18 per cent while 2 to 3 per cent for the SNGPL’s consumers. Under section 8(4) (of the Ogra Ordinance, 2002) the prescribed price shall become the sale price, if it exceeds the latter,” the ECC was informed.

The petroleum ministry and the Ogra have now devised a mechanism under which the prescribed price of all fields in the country would be averaged out and would be charged to the SSGCL and the SNGPL on equal basis, sources said.

Historically the sale price of gas for consumers has been kept uniform all over the country irrespective of location. However, as a result of petroleum sector deregulation, the pattern of the cost of gas purchase has significantly changed for the two utilities, on account of injection of additional volumes of high priced gas from new fields in the SSGCL system and supply of low priced gas to the SNGPL.