KARACHI, Feb 1: The government to mop up over Rs24 billion at the cost of industrial consumers towards Gas Development Surcharge (GDS) for non-implementation of Oil and Gas Regulatory Agency’s (Ogra) three successive decisions suggesting downward revision of over 10 per cent in gas prices.

The industry had been complaining for long about high cost of doing business and was demanding of the government to come up with some relief to keep it viable as well as competitive in the world market. Even successive decisions of the OGRA for downward revision of gas prices had not been implemented or notified by the government which could have given some relief to the industrial consumers.

Consequently, the industry is perturbed over the indifferent attitude of the government seems to be more keen about its revenue collection rather than industrial activity and exports. There is general complain that when Ogra suggests upward revision the government wastes no time in issuing notification for its implementation but when it comes for downward revision the delaying tactics are adopted.

After successive six upward revisions in gas prices the government in July 2005 fixed gas rates at Rs208.56 per MMBTU showing an increase of 25.50 per cent over the previous price of Rs166.18 per MMBTU. In July 2006, the rates were further revised upward at Rs264.89, thereby showing an increase of Rs56.33 per MMBTU.

The government had been claiming that increase in gas wellhead prices was a major factor for upward revision whereas the industry alleges that the government has linked gas prices with world prices of oil and furnace.

The industrial consumers also feel that the guaranteed return of 17 per cent and 17.5 per cent to Sui Southern Gas Company and Northern Gas Company, respectively, on average net fixed assets (ANFA) and government’s own revenue source under the head of Gas Development Surcharge (GDS) are major factors for rise in gas prices.

Another factor which puts unnecessary burden on the industry is the cost of subsidies provided to domestic consumers and fertiliser industries.

The industry is of the view that gas being a prime mover of country’s economy, therefore, its pricing, allocation and management should be done with utter care and expertise based on broad vision.The formula of indexing prices of gas to crude oil and furnace oil has been rejected by the industry saying that it is based on a theoretical concept of opportunity cost. If the same is put in simple words it would mean that in case Pakistan were not to produce gas, then it would have to import oil as its substitute.

It is also being argued that Pakistan is producing indigenously therefore it is a natural resource for the benefit and convenience of its people.

Other nations with such natural resources like Saudi Arabia, Iran, Holland and for that matter even Bangladesh supply oil and gas to their local consumers at less than world prices of these energies.

However, the industrial consumers are totally at loss and apprehend that this will wreck havoc on the industry and exports. “If the government does not act now, the damage will be irreparable and export target of $17 or $18 billion will remain a dream”.

The industrial consumers say that the profit made by the gas companies over and above the fixed return on net average fixed assets is passed on to the government under the head of Gas Development Surcharge (GDS).

Above all the industry feels that the fixed 17 to 17.5 per cent return is providing protected environment to gas utilities.