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Informed sources said the Sept 2010 decision to increase UFG to seven per cent and to treat revenues from operating assets as non-operating income was shared by Ogra leaders with powerful stock exchange brokers sitting on the board of directors of the gas companies. - File photo


ISLAMABAD: The boards of directors of gas utilities have started tightening noose around Oil and Gas Regulatory Authority (Ogra) to reverse about 11 per cent reduction in gas prices which would come into force on July 1.

Sources in the Petroleum Ministry told Dawn on Friday that the ministry had received a resolution from the board of directors of the Sui Southern Gas Company Limited (SSGCL) that sought to defy Ogra’s directives and determinations.

“This is an unusual situation where a regulated entity is refusing to obey a regulator established by the parliament as a quasi-judicial forum,” the official said.

He said that the Petroleum Minister, Dr Asim Hussain, fully supported the gas companies’ cause for non-implementation of the Ogra determination.

He believed that loss reduction target approved by Ogra would weaken financial health of the two gas utilities.

The minister has supported a move by the National Assembly’s standing committee to place the Ogra under the administrative control of the Petroleum Ministry.

Under various decisions of the Federal Cabinet, the government had put all regulators under administrative jurisdiction of the Cabinet Division to avoid conflict of interests and undue pressures from respective ministries.

An identical resolution passed by the SSGC board of directors said: “Ogra has transgressed its jurisdiction in the matter and hence the company is legally not bound to comply with such directions.”

The resolution sent to the petroleum ministry two days ago sought “kind perusal and assistance (of the petroleum ministry) in resolving the long outstanding issues.”

The unusual resolution declared the Ogra’s determination as “highly unjustified and in contravention of Section 9 of Ogra ordinance and hence not maintainable.”

The resolution asked the SSGC management to examine the possibility of recovering the already paid amount under the head of penalty/disallowances during the previous years.

The SSGC board regretted that the language used by Ogra regarding salaries and other human resource issues could result in a conflicting situation between the company management and workers.

“This attitude and approach of the Ogra is totally beyond any legal and moral jurisdiction and the management is directed to evaluate the situation and advise the board on legal remedies available to the company in the matter,” he concluded.The resolution reached the Petroleum Ministry only days after the National Accountability Bureau confirmed before the Supreme Court of Pakistan colossal losses to the public exchequer and the general public through gas pricing, theft and illegal establishment of CNG stations granted by the Ogra in previous years that had allowed increase in system losses causing about Rs70 billion financial loss to consumers.

Under the Supreme Court directions, the NAB had got arrest warrants issued against former Ogra chairman Tauqir Sadiq and member Ogra Mansoor Muzaffar Ali.

While Mr Tauqir is absconding, Mansoor Muzaffar was arrested by NAB and was currently under investigation.

Now that the Ogra moved to correct its past wrongdoings, it was under immense pressure to allow higher system losses instead of reducing consumer tariff.

The NAB has told the apex court that the arrested Ogra member has “made serious revelations, particularly concerning pricing mechanism of Dewan Petroleum, raising of unaccounted for gas (gas losses) benchmark, injunctions passed in gas theft cases and connivance of other Ogra executives and private persons.”

It said the process for freezing of known properties of Tauqir Sadiq and other involved accused persons and benamidars is under way to affect the recovery of public money.

“So far, 40 bank accounts of the accused persons have been placed under caution. Simultaneously reference under National Accountability Ordinance 1999 is also under preparation.”

The NAB said the financial impact of the decisions taken by former chairman Ogra Tauqir Sadiq has been established which caused substantial loss to the general public and exchequer. This has resulted because of changing operating income to non-operating income of SSGCL and SNGPL.

The report said that as a result of increase in gas loss benchmarks from 5 per cent to 7 per cent for the two gas companies, gas sector suffered billions of rupees loss.

According to one estimate, gas consumers suffered a whopping Rs70 billion loss over three years thanks to a single decision of the Ogra to hike the prices in a violation of the then rules.

As a result, there was a 13 per cent increase in gas tariff for that year, followed by another 15 per cent increase in August 2010 and about 14 per cent with effect from Jan 1, 2011.

Informed sources said the Sept 2010 decision to increase UFG to seven per cent and to treat revenues from operating assets as non-operating income was shared by Ogra leaders with powerful stock exchange brokers sitting on the board of directors of the gas companies.

Consequently, the SSGCL share being traded at the stock exchange for Rs16 on Sept 23 jumped to Rs36 in a matter of days.

As stock players earned over Rs10 billion, the then Ogra chairman tried to reverse the decision after an onslaught of public criticism but was vetoed by Ogra’s member gas who is now in NAB custody.