KARACHI, April 26: The Sui Southern Gas Company came under a lot of criticism on Monday at a public hearing where consumers forcefully opposed a rise in tariff.
The hearing was organized by the Oil and Gas Regulatory Authority.
Making out a strong case for the tariff hike, the gas utility argued that the increase of Rs14.51 per million British Thermal Unit (mmbtu) would enable it to continue to operate at a profit.
Political parties, which otherwise clamour for the rights of the masses, were not present at the public hearing. SSGC senior general manager Syed Hasan Nawab told the audience that the gas utility had revised its original petition asking for a rise of Rs18.81 per mmbtu. He said that now the SSGC wanted the tariff raised by Rs14.51 per mmbtu.
He observed that whenever the SSGC asked for a hike in tariff, consumers objected to the well-head prices the gas utility paid to exploration and production companies. He made it clear that the well-head prices were determined by the ministry of petroleum, which also fixed the amount of gas the SSGC purchased from the companies.
He pointed out that consumers also criticized the ADB covenant about 17 per cent return on assets. He said that the SSGC could do very little about it. The chairman of the SITE Association of Industry, M. Nisar Shekhani, said if the regulator allowed the SSGC to up its tariff, the industry would suffer a lot - not only in terms of local production, but also in exports.
He alleged that the petition was based on misleading figures. "Gas prices are rising at such a high rate that businessmen are increasingly opting for other sources of fuel.
Furthermore, transmission and distribution losses, which are known as unaccounted-for gas (UFG) in technical parlance, are a matter of dispute. The SSGC has failed to comply with OGRA instructions about the reduction in UFG."
Taking exception to the allegation made by Mr Shekhani, the SSGC senior general manager said that SSGC was a public sector company whose accounts were audited by internal as well as external auditors. He stressed that there was no scope for manipulation in the SSGC.
In his characteristically caustic style, Mohammad Arif Bilwani, a businessman, wondered why the revised petition had not been provided to interveners who opposed the tariff rise at public hearings.
He criticized the government for subsidizing the domestic sector and the fertilizer feedstock sector. He said that if the SSGC provided the amount of gas it gave to these sectors, it could earn a lot of profit.
"Subsidized sales to the fertilizer feedstock sector and the domestic sector during 2003-04 come to Rs5.6 billion. For the year 2004-05, the amount comes to Rs5.9 billion. If the same amount of gas was sold to the industry, the sale value would have been Rs11.4 billion and Rs14.2 billion, respectively," he explained.
Mr Bilwani also questioned the rationale behind providing gas to those underdeveloped areas. "I don't say that don't give gas to these areas. Do that by all means. But the government should do it only if it has the capacity for expansion. If the government wants to give gas to all the villages of Pakistan, it should do at its own expense," he contended.
Responding to the intervener's comments, Mr Nawab promised that the revised petition would be made available soon to consumers. He said that the government decided about providing gas at subsidized rates to certain sectors. He said the SSGC could not comment on the rationale behind the decision.
The chief manager of the Karachi Electric Supply Corporation's finance department, Abdul Rauf Yousuf, presented arguments against the tariff rise demanded by the SSGC. He said: "The KESC is the largest consumer of the SSGC.
In 2000-01, it received 93 mmcfd (million cubic feet per day) from the SSGC; in 2001-02, 120 mmcfd; in 2002-03, 141 mmcfd and in 2003-04, 245 mmcfd. Since the KESC is a bulk buyer of gas, it should get a discount from the SSGC."
Mr Rauf pointed out that the tariff hike, if allowed by OGRA, would burden the KESC with an additional cost of Rs2 billion on an annual basis. Admitting that the KESC was the largest consumer of the SSGC, Mr Nawab pointed out that the gas utility allowed the power utility to make payments after 45 days. He said that the KESC purchased alternative furnace oil from the Pakistan State Oil on advance payment.
The senior general manager of the SSGC's engineer services department, Anees Ahmad Ansari, answered technical questions about the heating value of natural gas being provided by the SSGC. The public hearing was conducted by the OGRA chairman, Munir Ahmed. He was assisted by the OGRA vice chairman, Jawaid Inam, member finance M.H. Asif and member oil Rashid Farooq.
APP adds: Talking to APP the OGRA chairman Munir Ahmed said OGRA would announce its decision on the petition of Sui Southern Gas Company Ltd (SSGC) by middle of May.
