ISLAMABAD, Nov 22: The gas tariff is likely to be reduced by 10 to 12 per cent on an average for all consumers from Jan 1, 2007, after the Oil and Gas Regulatory Authority (Ogra) moved to cut revenue requirements of the two gas utilities -- SSGCL and SNGPL -- for the current year.

However, by that time the federal government would have earned a benefit of about Rs12 billion because the Ogra decision stands implemented with retrospective effect from July 1, 2006, but the relief would be passed on to consumers after six months later i.e. from January 1, 2007.

Sources said that the finance ministry had been unwilling to reduce natural gas tariff for consumers to partially ‘bridge budget deficit’, but the petroleum ministry was seeking to implement the reduced gas rates as determined by Ogra. A final decision would be made by the prime minister soon, the sources said. Ogra had sent its determination to the federal government seeking its advice. The determination envisaged a reduction of about 10 per cent in the prescribed prices for Sui Southern Gas Company (SSGCL) and 14 per cent for Sui Northern Gas Pipelines Limited (SNGPL) in the last week of September this year had already become effective early this month since the government did not advise any change.

The revenue collection of the gas utilities over and above the ceiling approved by Ogra would automatically be credited to the government account. Under the Ogra law, the government has to revise consumer tariff on biannual basis -- on the first of January and July every year -- even if prescribed prices change earlier.

Official documents suggest that Ogra re-opened financial accounts of the two gas utilities and after examination of all sources of their income concluded in the last week of September that the companies had been allowed much higher rates than their revenue requirements.

Interestingly, the reduction in tariff determined by Ogra would reduce the operating income of SNGPL and SSGCL by more than Rs16.203 billion and Rs8.069 billion, respectively. Ogra, however, enhanced SNGPL’s revenue by about Rs2 billion on Nov 22.

In its determination on the gas rates of the SNGPL, the gas authority found out that the revised estimates of the company’s net operating income was Rs147.343 billion against (its) revenue requirement of Rs131 billion for financial year 2006-07. As such, to adjust the difference of Rs16 billion, Ogra made a downward revision of about Rs20 per MMBTU (Million British Thermal Unit) in SNGPL’s average prescribed price for the current year.