The authorities seem to have given in to the pressures of the gas utilities by increasing the limit for Unaccounted for Gas (UFG). The gas consumers should get ready for higher bills come 2016 as the Oil and Gas Regulatory Authority (OGRA) has finally increased the UFG volume in the gas tariffs to seven percent from the existing 4.5 percent.
The gas distribution companies - SSGC and SNGPL - have almost declared bankruptcy as the permissible UFG losses of 4.5 percent too less than what they are incurring. Both the utilities are facing UFG losses of 11 to 15 percent. Now OGRA has increased the UFG limit in an attempt for determining the final revenue requirement for these companies for the years these firms have not released their financial accounts.
On one hand the country is getting ready to get these gas distribution companies unbundled into profitable business units, while on the other, there seems to be a lack of will to take steps that are effective in the longer run. Though the decision by OGRA regarding the fate of UFG was awaited, it surely is not something that should be hailed; increasing the UFG limit is like encouraging gas thefts and leakages; BR Research has time and again emphasized the correcting of wrongful institutionalizing of practices in the public sector energy companies. Worldwide the allowable limit for such losses is only between 1-2 percent.
Not only that, it is suggestive that those at the helm have little discretion to do away with the lack of governance and mismanagement; at one time it was thought that gas theft alone was a major reason for the high UFG. But let it be known that apart from gas thefts, mismanagement and inefficiencies also make a significant portion of the total losses. A key example of such wastefulness includes no heed paid to the development and up gradation of the gas distribution and transmission infrastructure, which results in erosion of profits.
At the same time, the law and order situation in the country has improved, so the excuse of lack of inaccessibility by the firms has also weakened to some extent. The latest increase of 2.5 percent entails one percent increase in the name of law and order situation, while the remaining 2.5 percent increase is being charged due to non-gas consumers.
Now in such a situation, where those with the reigns of the companies are taking little to no interest in fixing one part of the problem i.e. the T&D infrastructure of gas, charging the legitimate consumers for the UFG losses defies rational and equitable thinking. Maybe it would not have been so painful had there been some evidence of some development work by the gas distribution companies.
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