Major policy shift: Gas companies told to reduce tariffs

The government of Pakistan has officially directed the board and managing directors of the two gas utilities to cut down major revenue sources to provide relief to consumers through lowering tariffs reported DAWN.

In a letter, the petroleum division has asked the chairpersons and managing directors of the Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) to seek approval of their boards for lower revenue requirements in the consumer tariff.

The companies have been asked to reduce their benchmarks of unaccounted for Gas (UFG) from 6.3 per cent to 4pc. This will cut gas companies’ revenue by Rs10bn a year.

Secondly, they are also asked to reduce their rate of return from 17 and 17.5pc to 15pc with a revenue loss of about Rs5bn a year.

Third, the directives also demand one per cent reduction in the rate of depreciation on assets with the financial impact of another Rs5bn. On top of that, both companies have also been asked to find ways to reduce their overall operational costs to create another fiscal space of about Rs5bn.

The letter, written by petroleum secretary Asad Hayauddin, has conveyed to the boards and management of the two companies that these areas have been identified through a review of “various options to decrease the gas sales prices with a view to providing relief to the gas consumers”.