No change in sale price of natural gas causes loss to SNGPL, burdens the consumers

Pakistan Muslim League-Nawaz (PML-N) government has allegedly been found artificially freezing the increase in gas tariff during the past few years, which caused financial losses to Sui Northern Gas Pipelines Limited (SNGPL) and an additional burden on gas consumers.

State-owned gas utility, SNGPL has been facing severe financial constraints. Its (SNGPL) cash flow position is dilapidated mainly because of the sale price of natural gas, which has not been increased proportionately to the increase in the prescribed price in the past few years by the incumbent government of PML-N, ostensibly to win public sympathies. The difference in prescribed price and sale price of natural gas has forced the gas utility to bank borrowings, resulting in an increased interest cost. The gas utility has paid Rs5billion markup on the loan it (SNGPL) obtained to run its daily businesses. This heavy markup worth billions will be passed on to gas consumers with the approval of Oil and Gas Regulatory Authority (OGRA).

Faced with adverse cash flow position mainly due to no increase in gas tariff by the government during last two years, SNGPL has asked the petroleum ministry to revise the gas price in order to avoid further losses and additional burden on consumers. Managing Director SNGPL, Amjad Latif has written a letter to Secretary Ministry of Petroleum & Natural Resources and sought a revision in the sale price of each category of the consumers.

Raising serious concerns over not increasing the sale price of natural gas proportionately to the increase in prescribed price in past few years, Managing Director SNGPL said, “the presently notified sales prices as per notification dated December 30, 2016, do not cater for the determination of final revenue requirements for financial year (FY) 2013-14, FY 2014-15 and determination of estimated revenue requirements for FY 2015-16.”

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MD SNGPL also said that the situation is of a grave concern, as the adverse cash flow position of the company (SNGPL) may affect the going concerns status of the company and the increased interest cost will immensely increase the consumer price.

It is also learnt that an amount of Rs5 billion paid by SNGPL as a markup on the loan would be passed on to the gas consumers after getting an approval from OGRA. “This additional burden of Rs 5bln markup is likely to be passed on to the consumers in July 2017 after getting an approval from the regulatory authority OGRA, “sources said.

It is worth mentioning here that the prescribed price is the price which the company (SNGPL) is entitled to receive for supplying gas to each category of natural gas consumer, whereas the sale price is the price actually paid by the end consumers of natural gas. The cash flow of the company is determined by the sale price it charges as per the notified prices for each category of natural gas consumer.


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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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