The government decided to go with the same prices of the natural gas and rejected the summary from Oil and Gas Regulatory Authority’s (OGRA) that had recommended a 2-6 per cent reduction in the prices of the utility. The decision of keeping the prices unchanged has been taken to partially offset the losses of gas companies.
A trusted source claimed that the government categorically told the regulator that on completion of mandatory 40-day deadline prices would remain the same for the current moment of time and a fresh notification was not required in this regard. He further added that the regulatory authority had determined and suggested 2-6pc reduction in the gas prices but at the same time guided the government to consider the adjustment of some of the previously outstanding revenue requirements. The net reduction was so nominal that it would not provide any substantial relief to consumers.
OGRA on July 14, 2020 had suggested the said reduction in the prices of two gas utilities for fiscal year 2020-21 so that the partial effect of reduction in international oil prices might be passed on to the gas consumers. The average prescribed price by the regulatory authority for SNGPL was Rs623.31/ mmBtu, that was currently prevailing at Rs664.25/mmBtu (6pc reduction).
OGRA had recommended 2-6pc reduction in gas price
The company had asked for a prescribed price of Rs1,287 per mmBtu, with Rs174bn as previous year adjustment and Rs73bn in connection with LNG diversion to residential and commercial consumers in winters. OGRA however sanctioned the annual revenue requirement of the company at Rs219 billion for FY2020-21 that had a network of gas supply in Punjab and KPK. Moreover, for the other company SSGCL, the regulator calculated an average prescribed price at Rs750.90 per mmBtu against its current average price of Rs798.18 per unit (2pc reduction). The company (SSGCL) had claimed a price of Rs881.53 per mmBtu that included some previous year adjustments and LNG costs. The regulator however sanctioned the annual revenue requirement of SSGCL for FY2020-21 at Rs270.18bn.
It is obligatory for the federal government under Section 8(3) of the OGRA law to advise and guide the regulatory authority about the minimum charges and the sale price for each category of retail consumers to notify in the official gazette; within 40 days.
SNGPL has a network of gas supply in Punjab and KPK
The managements of both companies (SSGCL and SNGPL) had pleaded that they were going under because of the prior year outstanding adjustments which the regulator had approved as legitimate heads but the government and OGRA did not notify it. The regulatory authority approved the said demand saying that the upsurges were previously recognized as genuine expenditures but the government could not pass on its impact to the consumers because of its social-political reasons.
The Regulatory Authority had turned down the request of including those allowances again in revenue requirement for FY2020-21 since these were related to the years for which it had distinctly calculated the revenue requirements but urged the government to find a way out so that the backlog might be cleared out that could be done through the provision of subsidy from the budget.