KARACHI, July 14: While industry and other segments of the society continue to agitate against the recent increase in gas tariff, it is a mystery why the government agreed to 31 per cent increase in tariff by the Sui Southern Gas Company when the Oil and Gas Regulatory Authority had allowed the 28 per cent raise, and that too without getting the accounts of the company audited by a neutral party.

There is a strong demand from the industry and the people that the increase should be withdrawn as gas was not being imported, and because the SSGC was merely a distributor and not the producer of gas. Industrial gas price in Pakistan is very high compared with the neighbouring countries, which is reportedly resulting in the closure of textile units and reduction in exports, which accounts for 67 per cent of the total exports of the country.

In its estimated revenue requirement for the current fiscal year, the SSGC had pleaded before Ogra that its net operating income is estimated at Rs92,134 million as against a requirement of Rs114,768 million, and thus there is a shortfall of Rs22,634 million for the said year.

Sources said that the increase was also not justified because Ogra itself had noted certain discrepancies in SSGC demands.

Moreover, Ogra had proposed to the government to fund infrastructure projects of national importance, like LNG or ISGSL, through its budgetary allocations instead of burdening the gas consumers.

It was pointed out that all expenditures pertaining to supply of gas to new towns and villages should be borne by the federal government instead of gas consumers or shareholders.

Similarly, expenses on account of security, losses due to sabotage activities, e.g. leakages, damages, repair and maintenance, insurance, etc., should be borne by the government because they accrue in consequence of government policies and actions or lack of action.

Sources said that by not considering this observation of Ogra, the government took an anti-people decision.

Meanwhile, according to un-audited accounts of the SSGC, gas sales in the nine months, up to March 31 increased to 277bcf as against 269bcf in the corresponding period of FY 2006-07.

The company posted a pre-tax profit of Rs938 million as compared to Rs722 million for the corresponding period, an increase of Rs216 million (30pc).

The benefit of a higher regulated return on the back of an increase in asset base and increase in other income was offset by higher tax impact.

Due mainly to heavy capitalisation, the company has to provide for a higher deferred tax liability and also suffers a levy of minimum tax (turnover tax at the rate of five per cent).

The report admits that unaccounted for gas (UFG) seriously affects the profitability of the company and the management was making efforts to control it.