ISLAMABAD, Jan 22: The government has put on hold more than 10 per cent reduction in natural gas tariff recommended by the Oil and Gas Regulatory Authority (Ogra) about two months ago to continue receiving windfall revenues and contain bank borrowing, it is learnt.

A senior government official told Dawn that a decision had been taken at the top to utilise revenues available in the system instead of resorting to high-cost bank borrowing. The net bank borrowing already surpassed Rs108 billion till early this month. The government has set a target for fiscal deficit at 4.2 per cent of the GDP but the international financial institutions are projecting it to be in the range of five per cent for the current year.

The Ogra had determined on Nov 22 last year a reduction in natural gas tariff by 10 per cent in case of the SSGCL and 14 per cent in case of the SNGPL by cutting down the revenue requirements of the two gas utilities. The Ogra had estimated that consumers would benefit a total of about Rs24.3 billion through reduction in gas rates.

The revenue collection of the gas utilities over and above the ceiling approved by the Ogra at higher consumer rates is automatically credited into the government account. The proposed reduction in tariff determined by the Ogra would reduce the operating income of the SNGPL and the SSGCL by more than Rs16.203 billion and Rs8.069 billion respectively.

“We are not waiting (for the government decision on gas price) anymore”, said a senior official at the Ogra. Under the policy and rules, the government should have advised the Ogra before Dec 31, 2006, how much reduction in gas rates it wanted to offer to various consumer categories from Jan 1, 2007. Secretary of Petroleum Ahmad Waqar was contacted on January 9 and asked if the government would implement the Ogra decision and reduce prices and if so when, he said he had just returned from abroad and would look into the subject on the following day. On Jan 11, he again said the decision would be taken in a couple of days. Before leaving for Iran on Monday, he said, he would talk about the issue on his return.

He, however, said the federal government could not earn windfall by maintaining higher gas rates because the amount thus saved should conceptually go to the provinces in the form gas development surcharge.

Interestingly when he returns from Iran after holding meetings on the Iran-Pakistan-India gas pipeline project, the prime minister would be visiting abroad and would not be back before the end of this month. The bills for the month of January have already been issued both by the Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL).

An official of the petroleum ministry, requesting anonymity, said a summary had been forwarded to the prime minister for gas tariff reduction in December but the ministry of finance had opposed the reduction.

An Ogra official explained that the government was required under the Ogra Ordinance to accept, reject or seek modification within 40 days of an Ogra decision.

If Ogra determines consumer prices higher than the existing rates, the new rates automatically take effect. On the other hand, if the consumer prices determined by Ogra are lower than existing rates, the old rates hold the ground until formally notified.

Legally speaking, he said, the government could notify a reduction in gas price with retrospective effect and adjustment could be made in the bills of subsequent months but it would create some problems. Under the rules, he said, the government was bound to notify new gas rates, notwithstanding increase or reduction, on the first day of January and July every year because gas revision was a biannual feature.

Under Section 8(3) of the Ogra Ordinance, the government can advise Ogra within 40 days of receiving the determination to make adjustments in the rates of tariff fixed for different categories but without affecting the overall revenue impact.