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Ogra rubber-stamps gas schemes to please lawmakers

Updated Jun 17, 2017 12:12pm

ISLAMABAD: Amid a political rush to deliver ahead of elections, the Oil and Gas Regulatory Authority (Ogra) has rubber-stamped additional expenditure of Rs10 billion for the Lahore-based Sui Northern Gas Pipelines Ltd (SNGPL) to be spent on new gas connections as per the desire of parliamentarians.

Ogra placed on the record that the original request for additional expenditure of Rs5bn was jacked up to Rs10bn just before the closed-door hearing.

“The budget approved for new schemes has been exhausted whereas the honourable parliamentarians are pressing hard for the initiation of work on the approved schemes immediately,” the regulator wrote in its decision while quoting SNGPL.

“These schemes will be sanctioned before June 30 and completed till December 31,” it added.

Original request by SNGPL for additional expenditure of Rs5bn was jacked up to Rs10bn

It also gave in detail the brief process that culminated in the approval of Rs10bn as “Work under GoP Directives” in about 10 days by Ogra. It said the petition for Rs5bn additional amount was filed on June 2 as endorsed by the SNGPL board on May 26. Another board meeting on June 8 doubled the demand to Rs10bn.

Ogra held a pre-admission hearing on June 9 ie within 24 hours of the SNGPL board clearance. It issued a written approval on the next working day ie June 12.

“Keeping in view the request of the petitioner and hearing conducted on June 9, the authority allows in principle an additional amount of Rs10bn,” Ogra said. It said the amount would not be included in the rate base of the company unless these projects were fully commissioned that could affect the working capital of the company.

Ogra allowed Rs9.24bn for the laying of distribution mains in October 2016 and accorded in principle another Rs9.061bn later for the current fiscal year. The total amount allowed previously, therefore, worked out to be Rs18.3bn. Fresh Rs10bn was on top of that.

Informed sources told Dawn that the cost of these schemes being initiated on political grounds would ultimately charged to the consumers as a return on the asset base of the gas company through its final annual revenue requirement.

The request for the additional amount had come to the regulator as a supplementary case under Section 13 of Ogra Ordinance that allows review of an old decision in exceptional and unforeseen circumstances.

“Keeping in view the urgent nature of the issue, immediate relief may be allowed on said matter... enabling the petitioner to sanction the approved budget and implement socio-economic agenda of the government,” SNGPL said.

“The company is under severe financial and political pressure,” said a senior official at the Ministry of Petroleum and Natural Resou­rces. He said the government was not allowing any increase in gas tariff and yet seeking increased expenditures on new gas schemes – both on political grounds.

SNGPL in its request said the government issued 110 directives during 2016-17 for various constituencies. The estimated cost of these schemes for SNGPL is Rs36bn.

It said Rs12bn had been sanctioned for laying about 5,100 kilometres of main supply lines and network expansion and Rs24bn was yet to be sanctioned for the remaining 7,900 kilometres of network expansion.

An official explained that Section 13 of Ogra Ordinance was over-stretched for political reasons as the regulator had already determined revenue requirements of the gas utility more than six months ago as the government did not allow passing on its impact to consumers.

This was also evident from Ogra’s order saying the said section should meet at least one of the two pre-conditions of change in circumstances and new admissible evidence for admission. But then it did not explain subsequently if it accepted the petition for change of circumstances or new evidence.

Under the practice in vogue, the Prime Minister’s Secretariat approves gas connections for new localities on the recommendation of parliamentarians and also provides funds out of the Public Sector Development Programme through the premier’s discretionary block allocations. Also, gas companies are forced to finance schemes through their return on assets base to be recovered subsequently from consumers.

Published in Dawn, June 17th, 2017