ISLAMABAD - To avoid burdening the masses, Oil and Gas Regulatory Authority (Ogra) has asked the government to grant heavy subsidy or take appropriate remedial measures for adjusting the gas losses sustained due to gas thefts and pilferage in the country.

Following the requests of Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipelines Ltd (SNGPL) to revise UfG benchmarks for current financial year 2013-14, the regulatory authority (Ogra), in a letter dispatched to Ministry of Petroleum & Natural Resources, has asked to issue policy guidelines for setting the UfG (Unaccounted for Gas) benchmarks.  “Suitable policy guidelines may be provided under the Section 21 of Ogra Ordinance, 2002 in order to address the issues, both for the FY2013-14, as well as with a specific reference to FY2012-13, decision of which is still pending,” the letter said.

On finding high gas theft and pilferage, both of the gas companies have admitted their inability to sustain decrease in the UfG and pleaded the authority to revise the benchmarks on account of various reasons including the shift of gas sales from bulk to retail consumers, deteriorating law and order situation in various regions, an increase in gas prices, an increase in gas thefts by non-consumers, and the aging pipeline network. During FY 2012-13, the UfG of SNGPL reached at13.07pc and 8.96pc in the case of SSGCL. Official sources said that the gas losses of SNGPL and SSGCL, which were soared earlier, would, however, now witness decrease after the authority fixed the UfG benchmarks for current financial year. They also said that so far previous year’s UfG benchmarks were yet not decided as the matter is currently under investigation with National Accountability Bureau (NAB) and pending adjudication in Supreme Court and Sindh High Courts. The government will have to grant around Rs18 billion subsidy to the gas consumers or it will have to seek provincial cooperation to avoid burdening the masses or gas companies in the wake of high gas theft and pilferages recorded in the jurisdiction of both gas firms during the running and even outgoing fiscal years, they added.

“The gas companies have been in litigation with Ogra in the court of law, particularly with reference to the UfG benchmarks since FY 2009-10, which has created an unsolicited situation over the years. The revision of UfG benchmarks by the authority in the final revenue requirement (FRR) of the gas firms for FY 2009-10, from 5pc to 7pc, also became controversial. The matter is under active investigation by NAB as well as pending adjudication in Supreme Court and Sindh High Courts. The final decision in this regard is awaited from the courts,” Ogra letter stated.

To avoid burdening the masses even gas utilities, the regulatory authority has also asked the government to grant a subsidy amounting to billion of Pak rupees. In this regard, the regulator authority, in a letter to the ministry dated 14th February 2014, also floated two options for consideration. First, grant of subsidy to the gas companies to meet the shortfall instead of shifting the load (around Rs18 billion) to the consumers/ general public. Second, appropriate remedial measures with provinces may be taken for adjustment of financial impact of such loss of gas on account of law and order situation.

Earlier, on request of licencees (gas utilities), the authority in 2005-06 reconsidered UfG and revised targets besides fixing its upper limit at 6pc and lower limit at 5.70pc, which was at 6.50 percent in 2003-04 and the upper limit in 2005-06 was set at 6pc while lower limit at 5.70pc was fixed. Later, upper limit of UfG was set at 6pc while lower limit was fixed 5.4pc in 2006-07. Similarly, upper limit of UfG was set at 6pc and lower limit at 5.1pc in 2007-08. More, upper limit of UfG was fixed at 5.5pc while lower limit was at 4.8pc in 2008-09. Again, upper limit of UfG was at 5.5pc while lower limit was at 4.5pc in 2009-10. Likewise, in 2010-11, upper limit of UfG was set at 5pc while lower limit was fixed at 4.25pc and in 2011-12, the upper limit of UfG was set at 5pc and lower limit of UfG was set at 4pc.  The UfG targets were set to induce the gas companies for reduction of gas losses by controlling their inefficiencies, in line with the National Security Council decision dated 11-10-2000.

Documents made available with this scribe have also highlighted that due to fixation of UfG benchmarks by the authority, the gas losses of SNGPL and SSGCL, which were hovering around 10pc to 11pc, reduced considerably over the next few years. The gas companies however were unable to sustain the decrease in UfG, which again started increasing thereafter, and reached to 13.07pc in case of SNGPL and 8.96pc in case of SSGCL for FY (fiscal year) 2012-13, while the companies repeatedly requested Ogra for revision in UfG benchmarks giving the reasons including shift of gas sales from bulk to retail consumers, law and order situation in different areas (especially in KPK and Balochistan), in crease in gas price, increase in gas theft by non-consumers, age of pipeline network and allowance for minimum billing.