ISLAMABAD: The federal government has directed Petroleum Division to prepare a policy paper for amendments to OGRA Ordinance 2002 empowering the Regulator to set and notify gas prices in future, sources close to Secretary Petroleum told Business Recorder.
The decision was taken at the meeting of the Economic Coordination Committee (ECC) on October 23, 2023 which was ratified by the Federal Cabinet.
The sources said that OGRA would set and notify gas prices after hearing all stakeholders. An appellate mechanism would also be provided, should a party seek review of the price set. Petroleum Division would transmit the policy paper to Cabinet Division for processing the amendment as per procedure.
ECC further directed that the revenue collected from fixed charges be allowed as ‘non-operating’ income to the Sui Companies to offset the undue burden of socio-economic losses including Balochistan and RLNG diversion to domestic sector in the North.
Petroleum Division has also examined the issue of SSGC’s revenue losses in Balochistan, in a holistic manner, in consultation with OGRA and Government of Balochistan and will submit viable recommendations thereon to the ECC for consideration.
The ECC further directed that Minister for Energy (Power and Petroleum) to convene a meeting with all the provinces to apprise them about the proposed increase in tariff and devise an appropriate communication strategy.
According to sources, it was stated that Federal Government, under the law, had 40 days to give advice to OGRA in respect of revision of gas prices. OGRA, thereafter, is required to notify. This time period has already elapsed. OGRA did not discharge the legal duty and the matter is again before the Federal Government. Global best practice is to empower the Regulator to set and notify prices after due process. Government should not involve itself in pricing matters. Pakistan has experienced delays in price adjustments with deleterious effects on the economy.
It was further noted that substantial increase is proposed in the gas tariff which will have implications on consumers, especially domestic consumers. Another view was that proposed increase (which has now been notified from November 1, 2023) in gas prices was necessary for meeting the revenue requirements of gas companies in CFY as well as to address issue of gas circular debt.
A view was expressed that Federal Cabinet on the recommendation of Cabinet Committee on Energy (CCoE) decided in January, 2021 to place a moratorium on supply of gas to captive power plants but the decision could not be implemented due to legal challenges. The incentive for use of gas for captive power should be removed by fixing the price of gas for captive at the level of LNG.
Copyright Business Recorder, 2023