SNGPL challenges Ogra’s methodology in LHC
WASIM IQBAL
ISLAMABAD: Sui Northern Gas pipeline Limited (SNGPL) has challenged Oil and Gas Regulatory Authority’s methodology in calculating Return on Assets (ROA), its human resources (HR) benchmarking formula, and the allegedly manipulated financial rates that favour Sui Southern Gas Company (SSGC) at the expense of SNGPL in fiscal year 2022-23.
The petition filed in Lahore High Court (LHC) levelled serious allegations on OGRA of ‘favouritism and bias’ in its Financial Rate of Return (FRR) determination for the fiscal year 2022-23. The controversy centres on OGRA’s decision to grant SSGC a 23.45 percent ROA, while restricting SNGPL to just 16.60 percent unlike current and previous final revenue requirements. This decision triggered a major reaction in the stock market— but in a way that has raised serious concerns. The most striking example is the dramatic 600 percent surge in the share price of SSGC which occurred shortly after the regulatory announcement.
While SNGPL a similar company operating under the same regulatory environment, showed no such change. SNGPL’s share price remained steady and behaved normally in the market. This significant disparity has raised concerns about the regulator’s alleged impartiality and decision-making process which led SNGPL to challenge the decision, the petitioner added.
The oil and gas regulatory body has also been accused of manipulating the classification of fixed charges. For SSGC, these charges have been categorised as non-operating income, while for SNGPL, they have been classified as operating income. This seemingly arbitrary distinction impacts the financial health of both companies, providing an unfair advantage to SSGC.
The contract of Chairman OGRA Masroor Khan had been extended for a year, effective Feb 23, 2025 apparently violating the OGRA Act as per some media reports. In a notification, the Cabinet Division said the government, under Section 3 (8) (a) OGRA Ordinance 2002, extended the contractual appointment of Masroor Khan till Feb 22, 2026. However, there is no provision for a one-year extension for the OGRA chairman in the said section of the act.
Similarly, Muhammad Arif was a Member (Gas) at OGRA whose tenure as a member ended on November 20, 2022. Since then no fresh member gas has been appointed and additional charge has been given to Member (Oil).
The legal petition has been filed in the Lahore High Court under Article 199 of the Constitution. The case invokes Article 25, which guarantees protection against discrimination. The petition challenges OGRA’s methodology in calculating ROA, its human resources (HR) benchmarking formula, and the allegedly manipulated financial rates that favour SSGC at the expense of SNGPL.
Furthermore, OGRA’s HR policies have placed SNGPL at a disadvantage. Despite being three times larger than SSGC, SNGPL is being forced to operate with nearly the same workforce, creating significant operational strain and reducing efficiency.
OGRA has since the fiscal year 2005-06 devised the human resource benchmark formula which has four essential components: consumer price index percentage (CPI), transmission and distribution network, number of consumers and sales volumes.
The petitioner argued that in fiscal year 2022-23, SSGCL has allowed CPI impact at 50 percent, whereas, SNGPL allowed CPI impact of 25 percent only.
With a smaller transmission and distribution (T&D) network and lesser number of consumers SSGC was granted a higher unit rate as opposed to SNGPL. For SNGPL (unit rate) T&D network Rs 117, 594 per km whereas SSGCL allowed Rs 297,068 per km, Rs 2418 per consumer of SNGPL and Rs 4,864 for SSGC, sales volume for SNGPL was Rs 25,202 per mmcf and SSGC Rs 22,906 per mmcf.
Despite being three times the size in terms of network in km and double the size in terms of consumers, HR cost in said year was allowed to SNGPL Rs 20598 million compare with Rs 19659 million for SSGCL.
