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ISLAMABAD: The Sindh High Court (SHC) ruled that gas tariff increase through the Oil and Gas Regulatory Authority (Ogra) notification dated 23.10.2020 is lawful.

It directed the Nazir SHC that the differential security deposited with him be encashed to pay the gas company.

The judgment said that the industrial gas connections used to generate electricity even only for self use are rightly classified as Captive Power Plant (CPP) as per the new definition inserted in the Nepra Act thru Section 2(iia) on 02.05.2018.

A Division Bench of the SHC comprising Justice Muhammad Junaid Ghaffar and Justice Sana Akram Minhas declared that the impugned judgment of its single judge is well-founded. “Consequently, these High Court Appeals lack merit and are hereby dismissed without any costs awarded.”

“The Nazir is directed to proceed further as per directions contained in paragraph 58 of the impugned judgment passed by the SHC single judge.”

The bench maintained that the moratorium on gas supply for Captive Power Plant (CPP) is valid.

The appellants are retail consumers of natural gas supplied to them by the Sui Southern Gas Company (SSGC) and, in the case of a few appellants, by the Sui Northern Gas Company (SNGC). The appellants operate industrial facilities dependent on natural gas and have contractual agreements for gas supply. The natural gas is employed by some appellants in their production processes, while others utilise it for electricity generation purposes as well.

The appellants had raised objection on the gas tariff notification dated 23.10.2020 by Ogra on the advice of the federal government, which was sought to be enforced retrospectively with effect from 1.9.2020 and which impugned notification was issued under Section 8(3) of the Oil and Gas Regulatory Authority Ordinance, 2002.

It (notification) increased the tariff of natural gas for retail consumers. For general industrial consumers the tariff was increased from Rs1,021 to Rs1,054 per MMBTU, and for captive power (general industry) it was increased from Rs1,021 to Rs1,087 per MMBTU.

The judgment noted that the appellants did not at any time challenge Ogra’s average prescribed price (of Rs750.90 per MMBTU given in its determination dated 14.7.2020 instead of the category-wise prescribed price) and nor anything was presented by the appellants to demonstrate that the appellants had objected to OGRA’s failure to determine the category-wise prescribed price as per Rule 21 of the Tariff Rules.

It said that the impugned judgment rightly concludes that Ogra’s failure to determine the category-wise prescribed price at the required stage was an irregularity which did not prejudice the appellants and, therefore, did not invalidate the impugned notification and the subsequent notification dated 23.11.2020 and that both were saved under Rule 21 of the Tariff Rules.

The division bench noted that the impugned judgment determines that under Section 8 (6) (b) of the Ordinance, the development surcharge is built into the sale price of gas if the latter is higher than the prescribed price, and is, therefore, an integral part of the gas tariff.

It said that the impugned judgment elucidates that the reason why the Ogra Ordinance does not “fix” a criterion for determining the sale price of gas and the development surcharge, is because under said Ordinance the decision to increase or not to increase the sale price of gas is recognised as a matter of Government policy and is so expressed in section 21 (2) (b) of the Ogra Ordinance.

The federal government’s decision to raise or maintain the sale price of gas beyond the prescribed rate for any fiscal period is evidently influenced by financial, economic, and political factors, considering the increasing value of a scarce natural asset and, therefore, is considered a policy matter. The jurisdiction of the federal government to formulate such policies under section 21 (2) (b) is not under challenge in these legal cases and courts typically refrain from intervening in governmental policies unless it is proven that such policies violate fundamental right. The single judge has referenced the case of Gadoon Textile Mills v. Wapda (1997 SCMR 641), wherein, it was held that when the surcharge imposed by Wapda is essentially incorporated into the electricity tariff, it does not qualify as a tax. “We concur with the rationale put forth by the single judge in supporting the development surcharge.”

Copyright Business Recorder, 2024

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