August 7,2002

Islamabad: Consumer Rights Commission of Pakistan (CRCP) has welcomed the decrease in prescribed price of gas by 32 paisa per Mcft as against the request for increase of Rs. 7.35 per Mcft for Sui Southern Gas Company (SSGC). Instead of granting the increase, the Oil and Gas Regulatory Authority (OGRA) has reduced its prescribed price by pointing out that, in fact, SSGC was not facing shortfall but had a surplus of Rs. 76 million in its revenue. CRCP termed the decision "satisfactory but its benefit should be passed on to the consumers by lowering the sale price of gas," it said.

While commenting on the decision of OGRA, Mian Abrar Hafeez, Secretary General CRCP, said that CRCP had pleaded against this petition in public hearing held by OGRA. It had requested the Authority to take into account the company's Unaccounted For Gas (UFG), receivables, salaries, and wages, which were extremely high and unjustified. UFG of SSGC were 7.58 percent, which are very high and can be brought down. As far the receivables, the company has to recover Rs. 2,003.417 million from its consumers in 2001-02, which were Rs. 1944.154 million in 2000-01. Salaries, wages and benefits have been increased by 15.84 percent (14.31 % increase in salaries allowance and 25.57 % increase in wages allowances) in FY 2001-02, which are not in line with rate of inflation, which was estimated at 2.6 percent in 2001-02.

Mr. Abrar, while reflecting on the decision regarding late payment surcharge, appreciated the Authority for considering CRCP's comments in this respect. It is important to note here that SSGC treated late payment surcharge as non-operating profit and therefore it was not counted in working out the revenue requirement. CRCP, during the public hearing, pointed out that the late payment surcharge should be made part of operating profit because it was related with gas sale, which is a regulated activity, and Authority should consider its legal status. As a result of this, the Authority has directed that late payment surcharge should be treated as operating profit. This decision of Authority has added Rs. 893 million into the operating revenue of SSGC, which has resulted in reduction of its revenue requirement.

OGRA has reduced the prescribed price of SSGC by 32 paisa per Mcft with effect from July 1, 2001 and directed SSGC to reduce its UFG, receivables and salaries etc. Mian Abrar Hafeez felicitated the consumers on the decision of Authority and said that this was the result of meaningful participation of CRCP on behalf of consumers. He also emphasized that the participation of consumers in such activities could save them from arbitrary decisions of government.

Mian Abrar Hafeez hoped that the Authority, while deciding the petition of SNGPL for determination of revenue requirement, would take into account the concerns of consumers raised during the public hearing and ensure the protection of interests of consumers through its decision in this case as well. CRCP demanded that the government should reduce the sale price of gas for SSGC so that the reduction in prescribed price may pass on to the consumers.

[Next]