PD seeks rationalisation of gas price structure
MUSHTAQ GHUMMAN
ISLAMABAD: The Petroleum Division has asked for rationalizing gas price structure aimed at enabling gas companies to extend the distribution network of piped gas to a far larger number of consumers, official sources told Business Recorder.
These instructions were issued at a recent meeting of the cabinet, when the issue of execution of gas development schemes during the incumbent government came under discussion.
The gas companies have already sought 220 percent increase in prescribed prices of gas from July 1, 2021 to meet revenue requirements for fiscal year 2021-22.
The Cabinet Division was briefed that the summary submitted by Petroleum Division, seeking approval of the Cabinet, was circulated in terms of rule 17(1)(b) of Rules of Business, 1973 amongst 28 Cabinet members for recording their opinion and subsequent return to the Cabinet Division. Fifteen members of the Cabinet endorsed the proposal of the Petroleum Division; replies from twelve members were not received within stipulated time, whereas one Minister, ie, the Minister for Maritime Affairs raised the following observation "how can a summary be floated w/o receiving comments from related ministries? This Summary should be discussed in the CCoE first, before placing it in the Cabinet. Hence in light of this, no comments can be given."
The summary was subsequently submitted to the Prime Minister for approval. Keeping in view the observation of the Minister for Maritime Affairs, Prime Minister desired that since the financial burden of schemes was to be borne by the gas companies the issue may be placed before the Cabinet.
The sources said a Sub-Committee in its 6th meeting held on November 30, 2020 while approving the gas schemes decided as follows: (i) the Committee directed that Petroleum Division may move a summary to the Federal Cabinet to authorize the Sub-Committee of SAP to approve new gas development schemes against the available savings of the previous programs;(ii) the Committee also directed Petroleum Division to consider and process the advice for M/s SNGPL with respect to provision of 300 gas connections to newly commissioned networks/gas schemes. The Committee accordingly, advised that Petroleum Division may move a summary in this regard to the Federal Cabinet for approval of policy.
It was highlighted that the ultimate beneficiary of the gas development schemes are domestic consumers, accordingly, for provision of gas connections on newly commissioned network a turn-merit policy is in vogue at the end of gas utility companies. However, in the past a policy of provision of 300 gas connections on newly commissioned network was in vogue which was being followed by both the gas utility companies until Supreme Court of Pakistan in its decision of March 6, 2018 dropped the proceedings against both the gas companies for provision of gas connections against the turn-merit policy/extraneous or political pressure. The Companies were also directed by the apex court to submit periodical reports about provision of new gas connections and in compliance to the said direction, the gas utility companies periodically submit the report to the Supreme Court of Pakistan.
The cabinet was informed that reportedly there is a pendency of approximately 2.8 million gas connection applications on SNGPL network while OGRA grants a target of 0.4 to 0.6 million per annum which included 10% urgent fee gas connections out of total. Currently, the gas companies are executing gas development schemes approved by the SAP-Steering Committee and SAP Sub Committee. Because of the backlog, the commissioning of newly laid networks will get delayed which will deprive the gas company of its Return on Asset (RoA) in its annual revenue requirement determined by OGRA until it is commissioned besides putting a financial burden on the company for payment of sum of a loan on which the asset has been developed. Accordingly, based on the recommendations of the SAP sub-committee Petroleum Division submitted the following proposals for consideration: (i) in order to commission the newly developed network under a gas development scheme, the gas utility companies will seek and process 300 applications of consumers per village/new locality falling under area of gas development scheme;(ii) Sub-Committee on the SAP on gas schemes may be authorized to approve new gas schemes against the savings available with the gas utilities from the previous programs, ie, MDGs/SDGs, etc.
The proposals were submitted for consideration and approval of the Federal Cabinet. The summary was circulated to Finance Division, Cabinet Division and Planning, Development & Special Initiatives Division for their comments — Cabinet Division commented that they are only providing secretariat support to the Steering Committee on SAP for execution of the SAP programme, however, Cabinet Division endorsed the proposals of the summary. Planning Division supported the proposal subject to compliance of the Supreme Court decision of March 06, 2018.
Further in view of over 2.8 million pendency for gas connections and owing to declining gas production, over 200 MMCFD imported LNG being supplied to the domestic sector during winters, it was suggested that processing of gas schemes to new villages/localities may be curtailed to commensurate with gas availability for ensuring sustained supply to the consumers. Finance Division has no objection to the proposal of Petroleum Division subject to completion of codal formalities and compliance with policy. However, Finance Division noted that Petroleum Division may present complete picture of schemes in various phases of implementation and savings/unutilized funds from past programs for informed decision by ECC/Cabinet.
During the discussion, the members requested for the list of schemes for which approval was being sought. The need to rationalize the gas price structure was also highlighted as it would enable the gas companies to extend the distribution network of piped gas to a far larger number of consumers. It was informed that at present only 27 percent of population was receiving piped gas and with the rationalization of pricing structure the percentage could go up to 45-50 percent of the population.
The issue of high Unaccounted for Gas (UFG) was also brought to the fore. Special Assistant to the Prime Minister on Petroleum stated that both SNGPL and SSGCL had shown improvement to the extent that UFG percentage of SNPGL was down to a single digit.
After detailed discussion, the Cabinet directed Petroleum Division to resubmit the case with list of gas schemes, providing the district-wise breakup, in the next Cabinet meeting.
