ISLAMABAD: In view of completion of quorum in the Oil and Gas Regulatory Authority (Ogra) and a commitment given by government to the International Monetary Fund (IMF), Ogra is soon likely to begin implementing policy directives regarding a 30 per cent increase in prices of natural gas, according to sources.

The consumer gas prices have generally remained unchanged since January 2013 because of a “freeze” imposed by Prime Minister Nawaz Sharif.

Finance Minister Ishaq Dar, however, gave a commitment to the IMF in June that the government would recover by July the losses incurred by gas utilities due to the “freeze”. But the prices could not be increased in July due to Ramazan.

Know more: IMF assured of consistent hike in gas prices

“The loss in cost recovery incurred by gas companies due to delayed price notifications of fiscal 2014-15 (due in July and January) will be fully recuperated in the new tariff which we will notify and implement by July 1, 2015. We will also make any necessary adjustments to notified prices to reflect imported gas prices, so that the cost of this gas will be fully reflected in the LNG tariff on a monthly basis,” Mr Dar informed the IMF in writing.

According to the sources, three critical issues top Ogra’s agenda after its quorum has been completed after a gap of about three years. Hectic legal and financial consultations are currently under way to urgently dispose of regulatory business that has been in limbo for three years.

These include approval of the final revenue requirements of the country’s two gas utilities for 2012-13 and 2013-14 and review of the estimated revenue requirements for fiscal year 2014-15, disposal of over 600 petitions and complaints, and finalisation of sale price for imported liquefied natural gas (LNG) which is being supplied to various consumers without any legal cover.

According to the sources, Ogra’s first priority is to finalise the revenue requirements of the Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipelines Ltd (SNGPL) because the two utilities have been unable to meet the mandatory requirement of finalising their annual accounts and their presentation to stock exchanges and the Securities and Exchange Commission of Pakistan.

This work will be followed by finalisation of decisions on the 600-odd petitions that have been piling up over the last three years. The finalisation of price for imported LNG involves some legal complications and Ogra will like to defer it for now.

The sources say a government team will try to convince the IMF staff mission, during their meetings in Dubai, to wait for a few days before Ogra could complete its tariff determinations. However, in view of the slippages on a couple of other issues (fiscal deficit and privatisation) the government has already finalised all the documentation required for issuance of a notification for increase in gas tariff.

In case the second course is adopted, the petroleum ministry will not be required to move a formal summary because detailed presentations were made to the prime minister and the finance minister before the government team led by Finance Secretary Dr Waqar Masood left for Dubai last week. “The notification for (gas) tariff will be prepared on a telephone call if the need arises,” a senior government official said.

Meanwhile, the Economic Coordination Committee (ECC) of the cabinet led by Mr Dar has already issued policy guidelines to Ogra for changes in the gas pricing mechanism.

The changes are aimed at passing on to consumers the “deemed sales value of gas” on account of theft, loss in security-hit areas, minimum gas supply and higher unaccounted for gas. This will require about 30 per cent increase in gas rates.

The guidelines will effectively double the amount of system losses to be charged to the consumers. The government will also like to adjust about Rs13 billion the SNGPL was forced to refund to the consumers because of a Lahore High Court judgment.

The ECC directive requires Ogra to provisionally allow four different heads of gas volumes in the consumer tariff. These include “volumes pilfered by non-consumers but detected and determined by the companies in accordance with Ogra procedure as provided in Rule 30 of the Natural Gas Licensing rules, 2002, volumes consumed in law and order-affected areas and impact of change of bulk-retail ratio on UFG using the base year as 2003-04”.

Published in Dawn, August 3rd, 2015

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