SSGC seeks price increase, enrages industry

Updated 26 Jun 2020

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Intervenors say the public sector utility was trying to deprive consumers from benefit of international oil price crash instead of extending a helping hand. — Reuters/File
Intervenors say the public sector utility was trying to deprive consumers from benefit of international oil price crash instead of extending a helping hand. — Reuters/File

ISLAMABAD: Despite a 26 per cent reduction in its cost of gas, the Sui Southern Gas Company on Thursday sought about Rs38 per unit (6pc) increase in prices which was vehemently opposed by more than a dozen industrial and trade associations, making a case for at least 30pc reduction to stimulate economy.

At a public hearing organised by the Oil & Gas Regulatory Authority (Ogra), majority of the intervenors lamented the poorly managed public sector utility was even trying to deprive the benefit of international oil price crash instead of extending a helping hand in the time of crisis and lockdowns to revive businesses, commercial activities, exports and transport and ultimately employment.

The hearing, presided over by Ogra Chairperson Uzma Adil Khan, in Islamabad was attended by most of the intervenors through videolink from Karachi. They were generally of the opinion that lockdowns had hit the business hard but the utility was seeking increase in gas prices to put multi-billion rupees of additional burden on the consumers.

SSGC Acting Managing Director Amin Rajput said that cost of gas amounted to 90pc of the total sales price and the company faced financial challenges such as; high unaccounted for gas (UFG); up to nine month billing installments under the government policy, huge receivables from Pakistan Steel, K-Electric; and tax refunds from the Federal Board of Revenue.

He said both the gas companies — SSGC and SNGPL — were going under due to prior year outstanding adjustments that were approved by the regulator as legitimate heads but could not be notified by the government and Ogra. He pleaded that the latter should take up the matter with the centre for adjustment of Rs200 billion outstanding amount including about Rs75bn payable to SSGC.

Rajput further added that the total revenue requirement for 2020-21 was Rs292.5bn without re-liquefied natural gas (RLNG), up by 6pc compared to Rs276.19bn for 2019-20. The company also needed Rs50bn to bridge the shortfall on account of gas development surcharge receivable up to 2017-18.

According to him, 5.89pc UFG had been worked out due to handling of imported gas RLNG and claimed Rs10.7bn impact of differential in its revenue requirement. He asked the authority to allow an increase of Rs24.43 per mmbtu for indigenous gas business and Rs13.64 per mmbtu for RLNG business.

Meanwhile, representative of All Pakistan Textile Mills Association (South), Raziuddin, said the gas prices were already unsustainable but Covid-19 crisis meant that business as usual would not work. He added the SSGC should renegotiate the wellhead gas price with the exploration companies.

Increase in gas price would make the textile sector uncompetitive in the global market and hence return on assets of the gas company should be frozen, he added.

Raziuddin continued that the shrinking importer economies like the EU, Japan and the US would lead to a price war between competing exporter countries and Pakistan would not be in a position to retain its already struggling orders. He said the prescribed price for zero rated export industries should not be set at Rs450 per mmbtu.

Published in Dawn, June 26th, 2020