Gas sector performance: Government partially implements steps proposed by IMF

The federal government has partially implemented measures proposed by the International Monetary Fund (IMF) to improve the gas sector performance, sources said.

On July 3, 2019, the Executive Board of the International Monetary Fund (IMF) approved a 39-month extended arrangement under the extended fund facility (EFF) for Pakistan for an amount of US $6 billion to support the authorities' economic reform programme.

THE federal government proposed action in four areas to improve performance in the gas sector: (i) the prompt adoption of the financial year 2020 gas tariffs as proposed by the regulator to become effective on July 1, 2019 (prior action) (ii) the reduction of losses in the sector through the preparation of a comprehensive plan for government approval by end-September 2019 and to be monitored through published quarterly reports; (iii) greater participation of the private sector in the gas sector, including via the unbundling of the two gas companies; and (iv) amendments to the Ogra Act to ensure the regular and timely notification of end consumer tariffs. The government gave an approval to Sui Northern Gas Company Limited (SNGPL) and Sui Southern Gas Company (SSGCL) for Unaccounted for Gas (UFGs) reduction plan to increase their revenues by Rs29.12 billion in three years. Under this plan, the SSGCL will earn an estimated Rs20.1 billion and SNGPL Rs9.023 billion by cutting down on UFGs. The Economic Coordination Committee (ECC) of the Cabinet in October 2019 formally gave approval to a three-year (2019/20 to 2021/22) UFG reduction plan for these public gas utilities. Under the plan, the SSGC will reduce its UFG by 9.55 percent (40,629 million cubic feet of gas per day) that is in financial terms equals to Rs20.1 billion. UFG reduction plan for SNGP will help SNGPL to increase its revenues in three years. In current financial year, it will cut the UFG by 1.5 percent (6,840mmcfd). In financial year 2020-21 by 1.25 percent (5,700 mmcfd) and by year 2021-22, the UFG reduction target is 1.25 percent (5,700mmcfd).

Federal Government has convened a meeting of Council of Common Interest (CCI) on December 23, 2019 to discuss the dismantling of two gas companies-Sui Northern Gas Company Limited (SNGPL) and Sui Southern Gas Company (SSGC) and amendment in Ogra Act. Petroleum Division revived the World Bank-supported gas sector reforms left unfinished by former Prime Minister Shahid Khaqan Abbasi amid resistance from provinces.

The proposed reforms envisage dismantling of two gas utilities-SNGPL and SSGCL-into at least five public sector companies, including a gas transmission company and four provincial distribution companies on the pattern of power sector companies. The sources said the Sindh and Balochistan governments have abstained from participating in the consultation meetings while those of Punjab and Khyber Pakhtunkhwa have reiterated their reservations on the grounds that they are against the spirit of Article 158 and 172(3) of the constitution. Federal government has proposed changes to the Ogra Act for CCI approval to eliminate the gap between regular semi-annual tariff determination and notification. After CCI approval, a bill will be introduced in Parliament for adoption, an official of Ogra told Business Recorder.