This was stated by SSGC Managing Director Munawar Baseer Ahmad while giving a detailed presentation regarding the company's revenue requirements at a public hearing organised by the Oil and Gas Regulatory Authority (Ogra) on the petition of SSGC here on Wednesday. Ogra Vice Chairman Rashid Farooq presided over the public hearing.
Munawar said the company expected to earn profit of Rs 561 million during FY07 against the loss of Rs 578 million in previous year. Hence, it proposed a reduction in gas price for all categories of consumers, and submitted a petition to the Ogra for approval.
He said that the company has estimated total operating income of Rs 89.570 billion against operating expenses of Rs 89.009 billion during FY 2007-08, thus generating a surplus of Rs 561 million. Its total operating revenues are estimated at Rs 76.169 billion and expanses Rs 76.746 billion for FY 2006-07 respectively showing a shortfall of Rs 578 million, he added.
The company (SSGC) had filed its petition on November 30, 2006 under section 8(1) of Ogra Ordinance 2002 and Rule-4(2) of Natural Gas Tariff Rules 2002 for determination of estimated revenue requirement for financial year 2007-08 and requested for downward adjustment of Rs 1.62 per mmbtu in its projected prescribed price with effective from July 1, 2007 after taking into consideration the wellhead prices expected to remain at the level of FY 2006-07. Late Payment Surcharge, Meter Manufacturing profit and Royalty Income from JJVL as non-operating income and HR Benchmark cost on 100 percent of CPI, subsequently, Oil and Gas Regulatory Authority vide Notification No OGRA-10-3(8)/2007 dated March 02, 2007 revised the sale prices and prescribed prices for each category of consumers with effective from February 1, 2007.
The participants while appreciating the SSGC's request for reduction in gas prices suggested that the proposed reduction was very minimal, which may be increased. The industrialists are facing great hardship of low pressure. It causes great damage to the manufacturing industries and has caused irreparable losses to the industrialists.
A representative of the industry was of the view that the past increase in the SSGC tariff has badly bit the industries of Karachi and in particular the exporting industries. This has not only increased the cost of production but also made them non-responsive to the competition in the international markets.
A representative of the SITE Association, Shikhani, drew attention of the Authority towards the provisions of Ogra Ordinance which makes the Authority responsible to protect the interests of all the stakeholders and requested that while deciding on the determination of the revenue requirement the interest of the industries be kept in view. He pointed out that late payment surcharge, meter manufacturing profit and JJVL royalty should be made part of the revenue requirement. Therefore, the justification given by SSGC is not acceptable.
He also pointed out that the government must consider removing the cross-subsidy to solve the problems connected with price distortions. Winding up the public hearing, Ogra Vice Chairman said that it was the duty of the Authority to balance the divergent interests of utility companies and consumers.
The Authority will scrutinise all costs with the help of a team of professional engineers, financial and legal experts, he said, adding that the Authority has provided opportunity to all stakeholders in the hearing and appreciated their whole-hearted participation in the proceedings. "Their tangible suggestions will help the Authority in this analysis," he added.
The Authority would take decision of SSGC's petition in a month or two. Ogra financial and technical experts pointed out a number of discrepancies in SSGC's petition and asked to submit written clarification within on week. Ogra also asked to submit details of SSGC's financial accounts for last three years.
Later, Munawar Baseer told newsman that reduction in gas price would be possible due to projected stagnant wellhead gas prices, better sales, and reduction in UFG (Unaccounted for Gas) level and decrease in other operating expenses. He said that SSGC's transmission capacity would increase to 1800 mmcfd from current 1400 mmcfd.
In two years' time while the company plans to spend Rs 10.385 billion in 2007-08 on expansion of gas pipeline infrastructure against Rs 10.213 billion in 2006-07. The company estimated gas sale of 424,678 mmcfd during FY07-08 against 365,491 mmcfd projected for FY06-07, he added.