August 9, 2002

Islamabad: Consumer Rights Commission of Pakistan (CRCP) has voiced its concerns about the increase in gas tariff by Rs 7.13 per Mcft allowed to Sui Nothern Gas Pipelines Limited (SNGPL) in a decision by Oil and Gas Regulatory Authority (OGRA). CRCP has approached the president secretariat to stop any increase in consumer price which the federal government is entitled to do under Section 8, sub-section (1) and (3) of OGRA Ordinance The tariff increase would not affect consumers this year because it would be adjusted from the Gas Development Surcharge (GDS) leaving the sale price unchanged. However, CRCP fretted about the prospects of increase in sale price of gas for 2.2 million SNGPL consumers in the next year because the government could raise the sale price in fiscal year 2002-03 to make up for the loss in its GDS incurred as a consequence of the recent increase. While reflecting on the impact of increase in SNGPL gas tariff, CRCP secretary general Mian Abrar Hafeez said, "the current increase of Rs. 7.13 per Mcft has a retrospective effect from July 1, 2002 and would be adjusted from GDS for the fiscal year 2001-02. Therefore, the resulting amount payable to the company would not be met through an increase in the consumer end price." However, Mr. Abrar said, "the government could increase the sale price next year in order to adjust the loss accrued due to the recent tariff increase." CRCP secretary general told that CRCP had pleaded against the SNGPL petition on several counts. Unaccounted for Gas (UFG) of SNGPL (line losses) continue to be on the very high side. Line losses for SNGPL are 8.13 % as on March 2002. Whereas international standards for UFG are 4 to 6 %. It is important to note here that 1 % line losses accounts for 415.73 million. Besides, increase in the maintenance expenditure has been substantial notwithstanding the parameters of efficiency. Maintenance charges for 2000-01 were Rs 188 million which increased to Rs. 302 million in 2001-02. SNGPL had to recover Rs. 1,700 million in 2001-02. SNGPL had written off more than Rs. 251.128 million in 2000-01 as bad debts. CRCP had requested the Authority to dismiss the petition. "Now that the Authority has allowed an increase in prescribed price, it should not affect the quantum of sale price," he maintained. Mian Abrar said that according to Section 8, sub-section (1) and (3) of OGRA Ordinance No. XVII of 2002, OGRA can only "advise the Federal Government the prescribed price of natural gas for each category of retail consumer for natural gas." The federal government determines the sale price, which is essentially higher than prescribed price (determined by OGRA). GDS amounts to the difference between sale price and prescribed price. Now the impact of increase in gas tariff was stringed to the determination of sale price by the government. He stressed that the government should realize the miseries of people who are burdened with exorbitant utility charges. He suggested that the government might harness alternative sources to sustain its loss. The government should not increase gas sale price in the next year, as it would particularly add to the burden of poor consumers.