Consumers may have to bear impact of gas loss

ISLAMABAD: The government is expected to decide on Monday to pass on to consumers the impact of natural gas lost due to theft, leakage, non-recovery of bills, and launching of village gas projects on political considerations. A meeting, to be presided over by Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi and attended by all members of the Oil and Gas Regulatory Authority and some officials of the gas companies, has been convened to take up the issue as a one-point agenda. Although Ogra is legally empowered to take such decisions — a right it has been exercising since its inception in 2002 — it has now asked the government to issue policy guidelines to bail out gas companies or get ready to provide huge subsidies to keep them afloat. At the heart of the problem is a decision on consumer-end gas pricing for four years — starting in 2010-11. The fiscal impact in 2012-13 alone was estimated at Rs35 billion. The government is in a fix because if it passes on the cost burden to consumers it will lose the moral ground to continue a campaign against electricity and gas theft. In case of the Sui Northern Gas Pipelines Ltd alone, the impact of gas theft was estimated at 4.46 per cent of the total 10.3pc system losses in 2011-12. Leakage was estimated at 4.1pc that year. Similar is the case for other fiscal years and the Sui Southern Gas Company Ltd. In view of investigations by the National Accountability Bureau on the directives of the Supreme Court, Ogra has asked the government to take a decision on non-consumers (gas pilferers), gas lost due to the law and order situation, minimum billing to all consumers to cater to minor leakages and change in bulk-retail ratio of consumers due to expansion in gas network on political considerations. An official said that after the appointment of a former SNGPL official as an Ogra member, the regulator was now inclined to increase the limit of unaccounted for gas (UFG) to ensure higher revenues to the two gas utilities — the SSGCL and SNGPL. Quoting the shift in gas supply from bulk consumers to retail customers due to load curtailment, massive expansion of domestic connections over the period, shortage of gas supply and load management policy of the government, Ogra said all these factors had a direct impact on the increase in gas losses of the companies. Ogra said bulk consumers were less prone to leakages and because of their high volume could be better monitored by the gas companies, but retail consumers where gas had been diverted in the recent past were more prone to leakages and theft and cause an increase in UFG. “This shift from bulk to retail consumes is not in their (gas companies) control and mainly governed by policies of the government,” Ogra said. This meant Ogra was convinced of arguments advanced by the gas companies. If so, the authority should take a decision on its own, instead of using petroleum ministry’s shoulders to bypass court orders that held that a maximum of 4.5-5pc losses be passed on to consumers which should be sufficient to take care of genuine inability to control theft, leakage and losses, etc. Based on original benchmarks, gas losses on an average are in excess of 10pc in the gas system, but changes in definition of various heads could be used to reduce it significantly. In the transmission system, 1pc of gas lost works out to about Rs5bn. Ogra has now told the petroleum ministry that UFG benchmarks were introduced in 2003-04 by Ogra in consultation with gas companies and hence the bulk-retail ratio should be taken for the same year to calculate projected UFG because this ratio had drastically changed since then because of government policies. In his letter, the Ogra’s member has indirectly advised the government to allow higher UFG allowance to gas companies for the previous fiscal year subject to adjustment on the basis of a future study by a consultant. An official said Ogra had encouraged the government to increase the UFG benchmark by around 3pc besides another allowance of about 1.5pc on account of non-consumers and law and order-affected areas. The total allowance would, therefore, work out to 4.5pc which translated into about Rs25bn per annum. Published in Dawn, May 19th, 2014