Revision of SNGPL''s gas tariff: LHC disallows implementation of Ogra''s decision

Lahore High Court (LHC) has disallowed implementation of Oil and Gas Regulatory Authority (Ogra)''s decision to revise prescribed gas price of Sui Northern Gas Pipeline Limited (SNGPL) to meet revenue requirements of ongoing financial year after the Petroleum Secretary informed the court that the federal government had no intention of following Ogra''s advice to lower the sale price of natural gas.
In its decision, Ogra had advised the federal government to notify gas tariff effective from January 1, 2011. But SNGPL had filed a petition in LHC against the Ogra decision. Member Gas Mansoor Muzaffar had also written a dissenting note on Authority''s (Ogra) decision on SNGPL regarding gas tariff.
In his dissenting note, the Member Gas agitated that the Authority (Ogra) had already allowed the petitioner an income on account of Meter Manufacturing Profit, Late Payment Surcharge, Royalty from JJVL as non-operating income and Unaccounted For Gas (UFG) at 7 percent per the decision on Final Revenue Requirement (FRR) for FY 2009-10 and therefore the Authority can not change its stance while giving decision on RERR for FY 2010-11, as it will be viewed with a pinch of salt by the stakeholders.
The LHC''s recent decision says: "Secretary Petroleum in his statement made before this Court on 12.01.2011 stated in unequivocal terms that for the time being, the federal government has no intention of following the advice of Ogra and lowering the sale price of natural gas, thus, as a consequence of decision dated 02.12.2010, the development surcharge payable to the government of Pakistan has increased."
Secretary Petroleum in his statement before this Court categorically stated that as an interim measure, UFG bench mark as determined in the final revenue requirement during 2009-2010 vide decision dated 15.10.2010 be used for determining the prescribed price until the UFG impact assessment study is completed.
It is a common ground between the parties as is also evident from the provision of section 8 of the Ordinance that Ogra determines the prescribed price, which is then advised to the federal government. Upon receipt of such advice, the federal government may fix the minimum sale price of the natural gas.
The licencee is entitled under the law to receive the prescribed price, and in case, sale price is higher than the prescribed price, the balance constitutes development surcharge, which is to be collected by licencee and transmitted to the federal government. Thus by way of decision dated 02.12.2010 prescribed price, has been decreased as a consequence whereof higher development surcharge has become payable to the federal government.
"It is obvious from the aforesaid that even as per the case of respondent Ogra, the petitioner company is facing financial difficulties, and as per the case of the petitioner if the prescribed price is reduced as per the impugned decision of 02.12.2010 it may not be in a position to carry out its operation to the ultimate detriment of the consumers," says the LHC decision.
LHC observed that since the government of Pakistan had decided not to lower the sale price on the basis of the advice of Ogra, the decision of 02.12.2010 had no effect on the consumers and grants them no advantage. The only beneficiary of the said order is the federal government, which shall become entitled to receive the larger quantum of development surcharge.
Secretary Petroleum in his statement clearly expressed that as an interim measure, he had no objection if UFG Bench Mark and the treatment of non-operating income of the petitioner is continued to be dealt with in accordance with the determination of the final revenue requirements of 2009-2010. In short person ie, the federal government likely to be effected by the grant of interim relief has in fact stated that such relief be granted.
"In view of above, this application is allowed in terms that for purposes of calculating the prescribed price UFG Bench Mark and the treatment of non-operating income of the petitioner shall continue to be as determined vide the final revenue requirement for the year 2009-2010 for the time being. This matter will have to be revisited after the UFG impact assessment study is completed which is directed to be produced before this Court," says the order.