ISLAMABAD: Amid a controversy over excessive power billing, the government is set to face another wave of public outcry as gas tariff for all categories of consumers, including domestic, is likely to be increased by three to five times in a month or so.
The phenomenal increase is anticipated in the wake of failure of the Oil and Gas Regulatory Authority (Ogra) and the federal government to notify consumer prices over the last four months.
“Our estimate is that a domestic consumer who receives a monthly bill of Rs500 will get a bill of about Rs5,000,” an Ogra official told Dawn.
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It could create a political crisis for the government as the people would forget power over-billing, he said.
A part of the surge would be caused by higher consumption in winter, but the major increase would come because of recovery of Ogra-determined revenue from consumers in eight months instead of 12 months.
The problem emanates from the inability of the government to advise the regulator how a Rs35 billion tariff increase be passed on to different categories of consumers within the stipulated time.
As a consequence, Ogra did not notify the consumer tariff by the deadline of July 1.
The Ogra law requires the government to advise the regulator about the adjustment in consumer tariff on the basis of prescribed price set by Ogra for two gas utilities. In case, the government fails to advise Ogra about the subsidy it wants to provide from the budget or through cross-subsidisation among different consumer categories in 15 days, the regulator is legally bound to issue a consumer tariff notification based on prices determined by it.
“Ogra has failed to meet its legal obligation for four months,” the official said. The private shareholders have started sending legal notices to the regulator and the government to take the matter to the court.
Informed sources said Ogra Chairman Saeed Ahmed Khan had repeatedly asked the government to advise it about the subsidy portion. Last week, he is reported to have written a strongly worded letter to the secretaries of the cabinet division and the petroleum ministry about the government’s inability to come up with an advice and the legal challenge arising out of the notices.
They said Mr Khan had warned that the regulator had determined around 14 per cent increase in average tariff on the basis of full year billing, but the average increase had now gone beyond 20pc because Rs50bn would now have to be recovered in eight months.
The sources said legal experts had advised Ogra to issue a notification in the first week of this month to avoid being dragged in the courts.
On top of that, Ogra will be required to notify consumer tariff at the rate of Rs470 per unit for each category of consumers irrespective of existing lowest tariff slab of Rs106 per unit for domestic consumers.
NEGATIVE EQUITY: According to an analyst, unless the increase is recovered from consumers, the capital market equities of the Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company (SSGC) can turn into negative. The SNGPL’s equity has been estimated to be Rs15bn in the negative.
The sources said the managing directors of the two gas utilities had been interacting with the minister for petroleum and natural resources, but to no avail.
Recently, they had an ‘SOS’ meeting with Finance Minister Ishaq Dar and told him that the balance sheets of the companies would be in the red and prices of their shares would plunge if the government did not immediately intervene.
Ogra had worked out 14pc increase in average gas rates in July on the basis of 4.5pc unaccounted for gas (UFG) losses to meet revenue requirements for 2013-14 through a public hearing.
This is in addition to Rs50bn the government had earlier asked Ogra to recover from consumers to meet losses of the two utilities for 2010-11, 2011-12 and 2012-13 on account of gas theft, non-recovery of dues because of law and order situation, increase in retail network and sabotage.
The ministry of petroleum and natural resources had recommended that the amount should be recovered through gas tariff by allowing higher UFG losses (up to 7pc) to bail out the gas companies.
In its estimates sent to the government, the Ogra had approved an increase of Rs58.29 per MMBTU (million British thermal unit) for the SNGPL and Rs22.90 per MMBTU for the SSGC with a maximum prescribed price of Rs469 per MMBTU.
Under the law, the government can advise Ogra to fix different rates for different consumer categories like domestic, commercial, industrial, power sector and cement but remaining within the average rate approved by the regulator.
Because of political considerations, the government has been passing on higher tariff increase to industrial and commercial consumers and lower tariff increase to domestic consumers through cross subsidisation.
Published in Dawn, November 4th , 2014
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