ISLAMABAD, July 26: The Sui Southern Gas Company on Friday sought about Rs5.11 per million cubic feet (MCF) increase in its prescribed price amid strong opposition from various consumer groups.

The SSGCL demand came when the Oil and Gas Regulatory Authority conducted the first public hearing for revision of gas prices since its inception two years back. The hearing was presided over by OGRA chairman Munir Ahmad.

SSGCL managing director Mukhtar Ahmad pleaded that the proposed increase was necessary with retrospective effect from July 1, 2001 to meet the 17 per cent return on the average fixed assets required under the Asian Development Bank loan covenants. The SSGCL is supplying gas to most parts of Sindh and Balochistan.

He said that an additional Rs2.24 per MCF was also required on account of the profit from the sale of Liquefied Petroleum Gas (LPG) business in the fiscal year 2000-01, treated as operating income.

An SSGCL official explained that the increase in prescribed price had no direct bearing on consumer prices but this would reduce the amount of Gas Development Surcharge (GDS) collected by the federal government.

He observed that since the GDS formed part of the divisible pool and was distributed among the provinces, the government might increase the consumer price to maintain a reasonable GDS level.

The interveners expressed concern over the gas losses, increase in operating costs — mainly on recent salary hikes of the executive and the unionized staff — quality of service, proposed privatization, outstanding receivables and the high rate of guaranteed rate of return offered to the SSGCL.

Dr S.M. Bhutta, a former expert of the National Electric Power Regulatory Authority, on behalf of people, said that capital expenditure for supply of gas to power stations should be recovered from the power stations who were to earn profit instead of passing it on to the consumers.

He said that increase in the gas price would discourage the use of the Compressed Natural Gas by the transport sector which would negate the government policy of substitution of imported fuel with local gas to save foreign exchange and for environmental protection.

He criticized the utility for not meeting the performance standards and demanded that interruptions in gas supply and reduction in pressure should be compensated by the utility, particularly for the industrial sector which had to rely alternatively on imported costly fuel oil.

Dr Bhutta demanded that there should be an independent meter testing laboratory for verification of meter readings by the company as testing by the utility lacked transparency.

He proposed that the government should not collect GDS from the consumers because it was no more being used for development of gas infrastructure for which it was originally imposed in the early 1960s.

The Consumer Rights Commission of Pakistan contended that the fixed amount of return under the ADB loan dispelled all incentives to improve performance of the company. The increase, it pleaded, would further relieve the company of behaving in a responsible and efficient way to reduce its possible expenditure.

The CRCP challenged the gas loss at the rate of 7.58pc, increase in transmission and distribution cost, and over 25pc increase in salaries and wages which was eight times higher than the inflation rate.

Besides, around 140pc increase in consumer-end price payable to the utility has also been fixed by the federal cabinet for the next three years. OGRA has so far left with the powers in only setting the prescribed prices and it would announce its decision shortly.