ISLAMABAD: The Sui Southern Gas Company Limited (SSGCL) has projected a shortfall in estimated revenue requirement (ERR) for financial year 2020-2021 at Rs28,242 million, seeking increase in average prescribed price by Rs78.95 per mmbtu in its prescribed prices effective from July 1, 2020, to compensate for increase in cost of gas and other components.
The Oil and Gas Regulatory Authority (Ogra) held a virtual public hearing on the SSGCL's review petition of its ERR/prescribed prices for current financial year 2020-2021 on Monday. Due to second phase and outbreak of the Covid-19 throughout the country, the virtual public hearing was conduct from the Ogra head office.
Industrialists of Sindh urged the oil and gas regulator to maintain the gas prices at existing level, and also suggested that the company should reduce unaccounted for gas (UfG) and human resource expenditure. The petitioner (SSGCL) shows that it is suffering from a shortfall of Rs22.741 billion in the natural gas business, and Rs5.241 billion in the RLNG business. The company further wants the inclusion of Rs9.4 billion as UfG each to tackle the loss in RLNG and natural gas in their distribution to the consumers.
The gas company is also facing a loss of Rs50.983 billion because of non-payment of gas development surcharge (GDS), which are receivable up to financial year 2017-2018. It is also seeking the required return on fixed assets at 17.43 percent (Rs7.079 billion) for natural gas, and Rs5.2 billion for imported gas (RLNG) net assets.
As many as 40 participants from various sectors of economy attended the public hearing. Razi Raziuddin of the All Pakistan Textile Mills Association (APTMA) said that gas sales revenue should not be decreased and human resources and other expenses should not be increased.
He further said that gas development surcharge (GDS) adjustment should not be allowed in the tariff. He further suggested the SSGCL should revise the surplus revenue, which was updated in October 2020. The projection of revenue for financial year 2020-2021 was based on two months figure of sold gas, which also needed to be revisited.
The chief financial officer (CFO) SSGCL revealed that the company projected Rs28.2 billion revenue, which was previous year's shortfall due to difference in sale price and the prescribed price.
He said the company did not include Rs19 billion surplus revenue of current financial year in the review petition. He further asked the regulator to allow the company to collect Rs40 gas meter rent with effect from September 1, 2020 as per decision of the federal government. "We can't collect until OGRA notifies the revised rate of meter rent," he added.
He said that two months' actual gas sales volumes had been taken with remaining 10 months based on determination revenue requirement. He said the government had announced to subsidize rate for tandoors, which needed to be released by the government.
He further said the company was facing an impact of Rs7.2 billion after oil price increased internationally. He said the company allowed to collect Rs750 million from the consumers under the present bench mark of UfG on system gas, which needed to be revised.
The company has to face Rs1.9 billion revenue shortfall in three months due to the Ogra's recent decision of revise Ufg on RLNG equal to domestic gas. He further said the Ogra cut the projected revenue of Rs1.1 billion for supply schemes of gas to towns and villages that come under 5km radius.
However, the authority allowed only Rs425 million and disallowed rest of Rs702 million. The company asked the regulator to allow Rs1.1 billion for introduction of smart metering, GCV and V3 index but it allowed Rs375 million to collect under this head.
The CFO said the recent decisions of the regulator created challenges for the company, which needed to be reviewed and stakeholder should be consulted, while bring the rate of RLNG UfG equal to natural gas.
Copyright Business Recorder, 2020