KARACHI, June 24: The SITE Association of Industry (SAI) has urged President Pervez Musharraf to issue directions for Oil and Gas Regulatory Authority (Ogra) to revert its decision for allowing hike in gas prices from July 1, 2006.

SAI chairman Ameen Bandukda in a statement issued here on Saturday said that Orga should bring the prices of gas down as it was an indigenous resource and in abundance. “There is no justification in continuously scaling its prices upwards,” he added.

Gas prices are to be increased from July 1, 2006 by 10 to 22.5 per cent for all consumers’ categories.

Mr Ameen said that at a public hearing held by Ogra recently, strong and convincing arguments were presented by the SAI and other consumers, which apparently had been of no avail. The association had provided them convincing arguments and suggested ways of meeting the revenue deficit of the gas companies.

He said he was surprised to note that as the amended petition for estimated revenue requirement for 2006-07 filed by Sui Southern Gas Company Ltd (SSGC) with the Ogra registrar vide its letter no. RA/21/07 dated March 24, 2006 had worked out cost of gas at Rs29.36 per mmbtu as against Rs4.04 per mmbtu previously. He said that he had worked out the increase in gas prices based on the rates applied by SSGC i.e. Rs31.52 per mmbtu and the existing rates i.e. Rs240.91 per mmbtu, the increase in percentage comes to about 15.5pc and not 22.5pc as quoted by the government.

Ameen said he failed to understand as to why the government was bent upon facilitating the SSGC and allowing price increase more than what they had actually petitioned for.

In the first quarter the SSGC had demanded an increase of 13.04pc but the government had actually allowed an increase of 15.5pc across-the-board, which was more than what was demanded by the gas producer. “This is for the second time in the history of Pakistan that a utility supplier has been allowed to increase prices more than what it has actually petitioned for,” the SAI chief observed.

He said that the government realised the rising cost of production and believed in providing an enabling environment but it was not following this in letter and spirit. “The ever-increasing prices of gas have rendered, particularly the products of value-added industries un-viable in the domestic and global export market. If the price of gas is not capped the export-oriented and value-added industries will be constrained to close down,” he added.

An analyst at KASB Securities said that though the increase represents a small share in CPI basket (2.05pc) it would add significant cost pressure on commodities and services such as electricity, fertilisers, textiles, and transportation and steel mills.

“Around 40pc of Pakistan’s electricity generation comes from hydel power with the remaining 60pc from thermal (gas generates 46pc of total electricity). If gas prices increase by 15pc, it contributes 1pc directly to CPI while indirect impact depends on different sectors’ ability to pass on the cost increase,” the analyst said.

He further said that fertiliser companies may increase urea prices by Rs20 per bag. These companies had already raised the prices by Rs10 per bag in April 2006 without any increase in gas prices.