September 18, 2008	Thursday	Ramazan 17, 1429

ISLAMABAD, Sept 17: The Sui Northern Gas Pipelines and the Sui Southern Gas Company have sought an immediate increase in gas tariffs to meet revenue shortfalls.

Sources told Dawn that the SNGPL and the SSGCL wanted increase in tariffs by Rs5.97 and Rs7.84 per MMBTU (Million British Thermal Unit), respectively on the basis of final audited accounts of the previous financial year.

The Oil and Gas Regulatory Authority (Ogra) had earlier allowed the two gas companies to raise tariff revenue requirements for the last year, the sources said.

However, on the basis of final audited accounts, both the utilities reached the conclusion that they would require a further raise to meet revenue target and to ensure a guaranteed rate of return.

Under agreements with the World Bank, SNGPL and SSGCL are entitled to a guaranteed profit of 17.5 per cent and 17 per cent, respectively.

This translates into a combined profit of Rs61 billion every year.

A government official confirmed that the two utilities had filed revised tariff petitions before Ogra on the basis of audited accounts.

He said the regulatory authority planned to hold separate public hearings in a few days and come up with its determination.

He said the revised tariffs would not be passed on to end-consumers immediately because relevant laws allowed a change in consumer tariff only twice a year -- July 1 and Jan 1.

The revision would be adjusted against gas development surcharge (GDS) the federal government collects for onward transfer to the provinces on the basis of their gas production. That would mean that for the time being the surcharge would come down.

This will be in addition to the 31 per cent average increase in gas rates allowed by the government with effect from July 1.

The two gas utilities are currently operating on the basis of a fixed rate of return on net assets.

Attainment of the stipulated profits is for all purposes guaranteed through adjustments of the GDS. Hence the firms are under no pressure to improve efficiency.

The government had collected over Rs20.7 billion as GDS last year against a budgeted target of Rs21.7 billion, resulting in a loss of Rs1 billion to the provinces in federal transfers.

A further increase in tariff is expected to curtail provincial GDS share retrospectively by another Rs1 billion and will be adjusted against the current year’s GDS.

Under the National Finance Commission award, the federal government transfers development surcharge on natural gas to the provinces on the basis of wellhead production, after deducting two per cent collection charges.

Sindh is the largest recipient of GDS, followed by Balochistan, the NWFP and Punjab, in that order.