Islamabad                  -           To reduce the gas tariff, the government has asked the gas utilities companies that instead of increasing gas prices, reduce allowable UFG benchmarks and return on assets.

The government has also asked the Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipeline Limited (SNGPL) to rationalise transmission and distribution costs to create some fiscal space for the Companies instead of simply resorting to increase in tariffs.

Both companies are incurring gas losses (UFG) in double digit which exceeds the best international practices, said a spokesman of the Petroleum Division here. According the spokesman one percent UFG loss of both Sui Companies in monetary terms exceeds 4 billion rupees. According the official sources, the total UFG losses of both the gas companies are around 12 to 13 percent against the allowed 7.3 UFG losses by OGRA.

The gas utilities companies are losing around Rs50 billion annually due to UFG. The Petroleum Division has initiated a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalisation of transmission and distribution costs to create some fiscal space for the Companies instead of simply resorting to increase in tariffs.

As per the spokesman, the PTI government at the outset faced a tremendous challenge in the form of financial deficit of over Rs150 billion accumulated by the two Sui companies over a period of last five years. Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) were forced by the successive governments to maintain low tariff for consumers especially domestic to get maximum political mileage. This artificial price management coupled with systemic inefficiencies has seriously undermined these public sector enterprises to deliver sustainable and economically viable services to the general public.

The Prime Minister of Pakistan, after taking stock of the challenge, directed that the corporate bodies under the Petroleum Ministry must be administered as per best corporate governance principles. In line with this vision of the Government, the Boards of all Companies under the Petroleum Division were reconstituted and known industry professionals were inducted as members. These Boards were tasked to appoint best available professionals as MD/CEOs of the Companies.

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The Spokesperson for Petroleum Division says that the division has actively engaged with all key stakeholders; the OGRA, the Board of Directors (BoD) and Managements  of the both Sui Companies to come-up with out of the box solutions to reduce the burden of high gas prices on the most vulnerable section of society. Both Sui Companies are incurring gas losses (UFG) in double digit which far exceeds the best international practices. One percent UFG loss of both Sui Companies in monetary terms exceeds 4 billion rupees. Hence the Government is asking Sui Companies to curtail UFG losses or reduce allowed UFG to ensure efficient use of gas.

The Spokesperson adds that the Petroleum Division is working to instill new thinking in the way the Companies’ business is being run. The Petroleum Division is taking necessary decisions to reinforce accountable corporate governance which discourages rent seeking and corruption and promotes value creation resulting in improved service delivery for the end consumers.