KARACHI, July 13: In a move that marks a departure from traditional government policy, the Oil and Gas Regulatory Authority has reduced the level of subsidy available to domestic consumers of the Sui Southern Gas Company.
Well-placed sources told Dawn on Tuesday that even lifeline domestic consumers - whose monthly use of natural gas does not exceed 100 cubic metres - were being deprived of subsidy, which was now available to industrial consumers, CNG stations, cement factories, Pakistan Steel and power stations.
They added that Ogra adjusted the prescribed prices in such a way that the total SSGC revenue remained unchanged. A notification issued by Ogra earlier this month, which shows a slab-wise increase of prescribed prices for domestic consumers, says: "The Authority has accordingly re-adjusted the prescribed prices of various categories of consumers without affecting the total revenue requirement, determined vide its decision dated May 19, 2004."
The sources said that the prescribed prices for the various slabs of the domestic sector were raised by at least 6.7 per cent. They added that the increase was: for the first slab (up to 100 cubic metres per month) from Rs69.31 to Rs73.95; for the second slab (over 100 up to 200 cubic metres per month) from Rs104.42 to Rs111.42; for the third slab (over 200 up to 300 cubic metres) from Rs167.06 to Rs178.25; and for the fourth slab (over 300 cubic metres per month) from Rs217.32 to Rs231.88.
High-ranking SSGC officials told Dawn that they had urged the government to retain the subsidy for lifeline consumers, adding that they knew that international financial institutions insisted that the level of subsidy be reduced without delay.
They said the gradual reduction of the subsidy would not only adversely affect the so-called lifeline consumers, whose energy consumption was not more than the lowest slab of the SSGC tariff, but might actually lead to pilferage.
"The SSGC has to spend Rs140 or thereabouts to deliver gas to consumers who use at least 1,000 cubic feet of natural gas. But the lifeline consumers pay only Rs69 for 1,000 cubic feet of natural gas. The consumers belonging to the second slab pay Rs104 for the same amount of gas," they said.
The sources said that the SSGC had suggested to Ogra that the subsidy should not be available to consumers belonging to the third slab and onwards. They added that the availability of the subsidy to consumers of higher slabs caused wastage of natural gas.
"The amount of money obtained from domestic consumers constitutes 14 per cent of the total SSGC revenue. Similarly, the sale of gas to domestic consumers is only 20 per cent of the total SSGC sales. Therefore, the SSGC has made out a strong case for the retention of the subsidy for lifeline consumers," they explained.
The sector-wise break-up of SSGC gas sales from July 2003 to Dec 2003 is: domestic 16 per cent, commercial 2 per cent, power 43 per cent, fertilizer 8 per cent, Pakistan Steel 5 per cent and general industry 26 per cent.
The sources said that the government had decided, in principle, to dismantle the subsidy enjoyed by the fertilizer sector. "Traditionally, the agriculture sector has remained most cosseted in Pakistan.
The economic planners of the country have accordingly protected the fertilizer industry by offering it a substantial subsidy," they recalled. They made clear that the fertilizer industry enjoyed no subsidy on natural gas used to generate electricity.
