Gas companies’ UfG growing alarmingly despite spending billions to arrest losses; OGRA should reverse raise in average gas price

The Federation of Pakistan Chambers of Commerce & Industry’s ruling group has opposed the OGRA to allow SNGPL to raise average gas price for all categories of consumers for 2020-21 by Rs13.42 to Rs 644.84 per mmbtu.

Expressing serious concerns over the constant hike in gas rates, FPCCI ruling party BMP Chairman Mian Anjum Nisar said the decision would seriously affect the industrial sector, especially exporters and the value-added sector, increasing their cost of production.

He said that the Oil and Gas Regulatory Authority has allowed Sui Northern Gas Pipeline Limited (SNGPL) to increase average price of gas by two percent while allowing 5.6 percent increase in the gas price for consumers of the Sui Southern Gas Company (SSGC) to control their losses though the Unaccounted for Gas (UfG) of both gas companies is growing alarmingly, despite spending billions to arrest the losses.

Calling for uninterrupted gas supply to the industrial sector, he urged the government to up-grade gas distribution and supply system to avoid losses.

The economy of Pakistan had severely affected by the outbreak of Corona Virus disease (COVID-19), as the industries particularly the SMEs are striving to deal with the post-Corona economic crunch and need to get support. Instead of providing subsidies or waivers, it is unjust to overburden the industries with hike in cost of production. An increase in natural gas costs will further weaken the economic environment which is already under threat on various fronts.

He said that the UfG of SNGPL reached around 11.9 percent and 16 percent of SSGC in financial year 2020-21 against the permissible limit of seven percent.

Mian Anjum Nisar said the percentage of UfG has been increasing each year dangerously and the consumers have to made payment of insufficiencies of the gas system, as the management of the SNGPL failed to control the UfG losses, despite incurring an expenditure of Rs1 billion as shown in the Final Revenue Requirements for financial year 2016-17.

UfG losses at overall company level increased from 7.85 percent in 2016-17 to 10.38 percent in 2017-18.

The management spent an amount of Rs6.8 billion on two UfG reduction plants but UfG losses remained 11 percent to 13 percent from the financial year 2010-11 to 2016-17, resulted in huge loss of Rs105 billion due to excessive UfG losses.

The UfG of the SSGC system also reached 16 percent, which stood at 13.29 percent in financial year 2016-17, 13.23 in financial year 2017-18, and 13.98 percent in 2018-19, despite spending Rs6 billion on reduction plan of UfG.

He said that gas and electricity are basic ingredients for the industrial sector and are must to keep the wheel of industry moving. He said that growth of local industry is a barometer of economy. He said that it is a very good sign that government is well aware of the rising demand of electricity and working on a number of power projects days and nights but government should also be aware of the fact that existing gas and power distribution system is not efficient and cannot bear the load of additional supply.

He called for uninterrupted and low cost gas supply to the industrial sector, urging the government to up-grade transmission and distribution system to ensure continuous and smooth supply of electricity and gas. He said that the recent countrywide electricity breakdown gave a big blow to the industrial sector and affected its production process. He said that repeated incidents of power failure in past have revealed weakness of power transmission and distribution system. He said that recent power failure has plunged country into darkness and situation can be further aggravated if steps on war footing are not taken.

He urged the government not to tolerate any laxity towards up-gradation of gas and power transmission and distribution system, as any negligence could cause unbearable loss to the trade and industry.

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