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ISLAMABAD: The government is working on a plan to break the monopoly of Sui Northern and Sui Southern by allowing private sector companies to operate in profitable areas through sale of gas to dedicated high-end consumers.
A senior government official told Dawn that the exclusive distribution rights of the two SNGPL and SSGCL had already expired in 2010 and hence the government wanted to open up the gas distribution system to the private sector.
Under the plan that is still at an initial stage, the private sector companies would be allowed to utilise the transmission system of the two gas utilities by paying tolling charges and then sell gas quantities to their consumers.
The official said the Petroleum Minister Dr Asim Hussain already had two meetings on the issue with Oil and Gas Regulatory Authority and the two gas utilities and would be listening to their feedback on Wednesday.
The basic idea behind the private sector’s entry into the gas distribution system was to generate competition among the distribution companies so that overall gas tariff could come down for the general consumers. The problem, however, was that private sector did not have enough financial resources to develop infrastructure of their own and compete with the state-owned utilities.
“The question of fair competition and tariff reduction is practically not possible in the given circumstances,” said an official requesting anonymity.
He said a couple of incumbent ministers were interested in allowing some selective private sector companies to secure a foothold in the gas distribution system. “Ogra would have to be extra-careful in designing the policy and rules that did not expose the consumers to exploitative private sector,” he added.
In their initial response, the two gas utilities have opposed to give up their existing consumers and service areas, fearing that smaller private sector would take away the “cream of consumers” having greater consumption and revenue return and restrict them to serve the loss-making socio-political consumers.
This is because the private sector would prefer bulk consumers where system losses remain negligible without sharing the socio-political responsibilities.
In view of this, the gas utilities have informed the petroleum ministry that they should not be forced to share their existing system and existing consumers with the private sector companies.
The two utilities are of the view that most of the system losses were occurring because of thousands of kilometres of gas pipeline system, where in some cases, they have to provide gas to scattered households, often on the directives of the government, without commercial returns.
The two utilities have told the government that could agree to share their transmission system only in case of fresh expansion in the consumer base and there should be a fair mechanism under which the private sector is required to also share a certain percentage of low-return consumers.
The sources said some private groups were already in contact with E&P companies to sell their 10 per cent permissible gas quantities to them for onward sale to dedicated bulk consumers by using the transmission system of SNGPL and SSGCL.
