Energy

Govt to reduce allowable UFG and return on assets of gas utilities

Aftab Ahmad

Islamabad: PTI government plans to reduce allowable unaccounted for gas (UFG) and return on assets to cut gas tariff for consumers.

Petroleum Division has initiated a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalization of transmission and distribution costs to create some fiscal space for the Companies instead of tariff.

At present OGRA allows gas companies 6.3 percent UFG and 17.34 percent return on assets.

The incumbent Government at the outset faced a tremendous challenge in the form of financial deficit of over Rs. 150 billion accumulated by the two Sui companies over a period of last five years. Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) were forced by the successive governments to maintain low tariff for consumers especially domestic to get maximum political mileage. This artificial price management coupled with systemic inefficiencies has seriously undermined these public sector enterprises to deliver sustainable and economically viable services to the general public.

The Prime Minister of Pakistan, after taking stock of the challenge, directed that the corporate bodies under the Petroleum Ministry must be administered as per best corporate governance principles. In line with this vision of the Government, the Boards of all Companies under the Petroleum Division were reconstituted and known industry professionals were inducted as members. These Boards were tasked to appoint best available professionals as MD/CEOs of the Companies.

The Spokesperson for Petroleum Division says that the division has actively engaged with all key stakeholders; the OGRA, the Board of Directors (BoD) and Managements of the both Sui Companies to come-up with out of the box solutions to reduce the burden of high gas prices on the most vulnerable section of society.

Both Sui Companies are incurring gas losses (UFG) in double digit which far exceeds the best international practices. One percent UFG loss of both Sui Companies in monetary terms exceeds 4 billion rupees. Hence the Government is asking Sui Companies to curtail UFG losses or reduce allowed UFG to ensure efficient use of gas.

 The Petroleum Division has initiated a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalization of transmission and distribution costs to create some fiscal space for the Companies instead of simply resorting to increase in tariffs.

The Spokesperson adds that the Petroleum Division is working to instill new thinking in the way the Companies’ business is being run. The Petroleum Division is taking necessary decisions to reinforce accountable corporate governance which discourages rent seeking and corruption and promotes value creation resulting in improved service delivery for the end consumers.

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