SSGC, SNGPL resist shift as regulator begins stakeholder consultations; public listening to set for Friday
Fuel utilities. Photograph: file
ISLAMABAD:
Following the federal government’s plan to restructure fuel utilities, the Oil and Fuel Regulatory Authority (OGRA) has determined to overview the present fuel pricing method based mostly on return on mounted belongings, maintaining in view present fuel sector dynamics and market liberalisation.
The federal government had tasked the OGRA with restructuring the 2 public fuel utilities by disposing of the mounted asset-based return. In accordance with officers, the regulator employed consultancy agency KPMG to overview the method, and it has submitted its report.
The regulator has began consultations with stakeholders to alter the fuel pricing method and has scheduled a public listening to right here on Friday to contemplate the views of stakeholders.
Since 2018, OGRA has been permitting a market-based price of return to the fuel utilities, particularly Sui Northern Fuel Pipelines Restricted (SNGPL) and Sui Southern Fuel Firm (SSGC), on the worth of their common web mounted belongings in operation for every monetary yr.
OGRA stated that, contemplating the newest fuel sector dynamics, together with demand and provide situations, value volatility, market liberalisation and worldwide benchmarking undertaken the world over, it has determined to overview the present fuel pricing method based mostly on the speed of return (ROR) by an impartial advisor, consistent with the accepted phrases of reference.
“OGRA, after receipt of the primary draft report as furnished by M/s KPMG, has determined to name a public session with all stakeholders as per its ToRs and the related authorized provisions to make sure transparency and inclusive stakeholder engagement,” the regulator stated.
The fuel utilities are opposing the proposal to shelve the assured asset-based return method and have requested the federal government to proceed with the present pricing regime.
The fuel pipeline community continues to develop, leading to greater fuel costs and elevated income for the utilities, however this enlargement has additionally led to fuel shortages throughout the nation. SNGPL’s working price surged from Rs66 billion within the monetary yr 2019-20 to Rs94 billion in 2023-24. On the similar time, its earnings swelled from Rs19 billion to Rs38.9 billion, regardless of a drop in fuel provide.
The utilities, SNGPL and SSGC, are of the view that the present asset-based return can’t be deserted. They argue that a number of benchmarks, together with unaccounted-for-gas (UFG), are linked to the asset-based return regime.
Nonetheless, various industries have repeatedly criticised the mounted price of return, arguing that the income of the utilities are rising whereas fuel provides are shrinking on account of continued enlargement of the pipeline community.
At current, fuel corporations are going through a round debt of Rs2.6 trillion, which has choked your complete power chain. Liquefied pure fuel (LNG) has been a significant factor behind the buildup of round debt, as SNGPL has to pay billions of rupees for LNG provides procured by Pakistan State Oil (PSO).
The current authorities has additionally opened the fuel market by permitting fuel utilities to allocate 35% of their fuel to 3rd events. Because of this, the regulator has obtained a number of purposes from personal events in search of licences to market fuel.
Oil and fuel exploration corporations had welcomed the federal government’s choice to extend fuel allocation to non-public events from 10% to 35%, saying it could assist enhance their money flows by enabling them to safe higher costs from personal patrons.
The exploration corporations are additionally going through money movement constraints because of the round debt problem and are of the view that the mounting debt has slowed the tempo of their growth initiatives.
