PM Delivery Unit overrides Ogra law to stop further gas tariff hikes.

Byline: Khaleeq Kiani

ISLAMABAD -- Amid rising political pressure owing to prevailing price hike, the Prime Minister Office is seeking a drastic cut to revenue requirements of the two gas utilities for current fiscal year to minimise increase in gas rates.

The move is likely to cast negatively on the ongoing talks with the International Monetary Fund (IMF), embarrass Oil and Gas Regulatory Authority (Ogra) that had determined the prescribed gas prices and affect the financial position of the Sui Northern Gas Pipelines Limited and Sui Southern Gas Company Limited.

A senior government official told Dawn that the PM Delivery Unit (PMDU) has opposed repeated requests from the Petroleum Division to increase gas tariff by up to 15 per cent in line with requirements of the IMF programme and Ogra law. Prime Minister himself is seeking a freeze on gas and electricity rates for at least remaining period of the current fiscal year.

A senior official at the Petroleum Division said a set of three measures would together cause a financial loss of Rs18 billion to the gas utilities this year while the Petroleum Division had been advocating an increase in gas tariff to generate Rs35bn in additional revenue in line with tariff determinations by the Ogra.

Special Assistant to the Prime Minister on Petroleum Nadeem Babar did not respond to request for comments when approached on whether the Petroleum Division under his administration supported the PMDU initiative. Finance ministry's spokesperson was also not available to comment if this would affect talks with the IMF.

To comply with the Prime Minister's directives, the PMDU has ordered a decrease in the rate of return for the two gas utilities from 17-17.5pc at present to 15pc. A petroleum ministry official said the 15pc rate of return did not even meet the cost of financing the gas utilities currently dependent on commercial banks owing to huge amounts stuck up with the government.

The reduction in rate of return to 15pc would dent the gas utilities by Rs4bn during the current fiscal year.

Secondly, the PMDU has also sought a decrease in the unaccounted for gas (UFG) losses from 6.9pc approved by Ogra to 4pc which would cause a further loss of Rs10bn to the two utility companies. Interestingly, the gas utilities have been seeking much higher UFG in gas tariff but Ogra had set these losses at 6.9pc on the recommendations of independent consultants appointed under the...