For the first time, Ogra has also forwarded an executive summary to the government informing it about factors leading to tariff increases. - File photo

ISLAMABAD: While inflation continues to be in double digits, the government is planning to increase the natural gas tariff by up to 14 per cent and electricity rates by 4 per cent.

The Oil and Gas Regulatory Authority (Ogra) allowed on Thursday a 14 per cent increase in the natural gas rates for Sui Northern Gas Pipelines Limited (SNGPL) and 11 per cent for Sui Southern Gas Company Limited (SSGCL) with effect from January 1, 2012, a senior Ogra official said.

Separately, a water and power ministry official said a notification for a 4 per cent increase in electricity rates had been sent to the law ministry for vetting in view of the fact that the proposed hike had to be made through a uniform tariff increase for all distribution companies of Wapda under an equalisation surcharge.

This was confirmed by a statement issued by the cabinet committee on restructuring (CCOR) which said: “Technical work on tariff determination has been completed and legal work is in under process. In the same way the mechanism for uniform tariff for the entire country and simplification for tariff are under development.”

Prices of oil products, including diesel, kerosene, high octane blending component and jet fuels, are also estimated to go up by 6-7 per cent on November 30, an official said.

An Ogra official said the SNGPL had sought a tariff increase of about 30 per cent (Rs118 per million British Thermal Unit) to meet its revenue requirement for financial year 2012. Since the increase has been allowed for six months starting January 1, 2012, a tariff increase of Rs43.90 per MMBTU was allowed by Ogra.

Likewise, the SSGCL had demanded a tariff increase of Rs44 per MMBTU or 14 per cent. Ogra, however, allowed a tariff increase of Rs34 per MMBTU, or 11 per cent, for six months with effect from January 1 next year. Under the Ogra law, the government is required to work out gas development surcharge on the basis of rates for different consumer categories and tariff slabs and notify fresh natural gas rates within 40 days or latest by December 31 for recovery of increased rates from consumers.

For the first time, Ogra has also forwarded an executive summary to the government informing it about factors leading to tariff increases. Ogra asked the government to  take policy measures to control tariff increases.

It said the foremost factor resulting in tariff increases related to gas shortfalls and resultant gas load management under which the government diverts gas from high-tariff consumers (like industries, CNG, power sector and commercial consumers) to low-tariff consumers like domestic and fertiliser sectors. The governments should stop supplying gas to consumers paying Rs500 per unit in industrial sector and divert it to domestic consumers paying about Rs150 per unit.

Secondly, gas utilities had to incur 70 per cent cost of development schemes recommended by parliamentarians. This not only keeps on adding low-priced consumers and thus higher gas requirements but also puts additional financial burden on gas utilities.

Thirdly, the gas transmission losses – technically known as unaccounted for gas – also have been on the rise although Ogra could not allow more than 7 per cent losses owing to a court order. One per cent gas loss, Ogra pointed out, translated into Rs1.5 billion that meant about Rs10-15 billion worth of system losses. Since the actual losses were to the extent of 13 per cent, the total system losses translate into more than Rs20 billion.

Fourthly, the cost of operations as a result of parliamentarians’ scheme was also costing gas utilities about Rs15 billion per annum. The government has been advised to look into these factors and take policy decisions to control such additional financial burden.