Gas companies told to cut tariff
In a major policy shift, the government has formally directed the board of directors and managing directors of the two gas utilities to give up major revenue streams to provide relief to consumers through lower tariff.
In a letter, the petroleum division has asked the chairpersons and managing directors of the Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) to seek approval of their boards for lower revenue requirements in the consumer tariff.
In the letter, seen by Dawn, the companies have been asked to reduce their benchmarks of unaccounted for gas (UFG) from 6.3 per cent allowed by the Oil & Gas
Regulatory Authority (Ogra) to 4pc. This will cut gas companies' revenue by Rs10bn a year. Secondly, the gas companies have also been asked to reduce their rate of return from 17 and 17.5pc allowed by Ogra to 15pc with a revenue loss of about Rs5bn a year.
SNGPL, SSGCL asked to seek approval of their boards Third, the instructions also demand one per cent reduction in rate of depreciation on assets with financial impact of another Rs5bn. On top of that, the two gas companies have also been asked to rationalise and reduce their overall transmission and distribution costs to create another fiscal space of about Rs5bn.
The letter, written by petroleum secretary Asad Hayauddin, has conveyed to the boards and managements of the two companies that these areas have been identified through a review of "various options to decrease the gas sales prices with a view to providing relief to the gas consumers".
The letter also put on record that on the advice of the Prime Minister Office preliminary consultative sessions had already been held with the SNGPL, SSGCL and Ogra on the four identified areas for consideration and desired action by the companies.
Informed sources said that the regulator had expressed its views clearly during those consultations, saying such demands could not be considered under the existing laws in the country because all benchmarks in the tariff had been set through a regulatory process, public hearing, expert studies and petitions.