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SNGPL plea to only affect non-export industry, CNG sector

LAHORE: The Lahore High Court’s decision to admit a petition of the Sui Northern Gas Pipelines Limited (SNGPL) against its regulator, the Oil and Gas Regulatory Authority (Ogra), may have some financial implications on the non-export industry and the compressed natural gas (CNG) sector.

However, there would be no impact on the domestic, commercial and five zero-rated export industries.

“How will the company recover money from the customers (general industry and CNG stations in Punjab and Khyber Pakhtunkhwa) when it has already charged them on the basis of the previous unaccounted-for-gas (UFG) rates determined by Ogra,” questioned All Pakistan CNG Association group leader Ghayas Paracha.

Talking to, Mr Paracha said Ogra had set the SNGPL’s UFG rate at 6.5 per cent — equal to that of the indigenous gas — and fixed consumer price on the basis of that rate. However, the company started charging consumers as per the Ogra notification, which it later challenged in the Lahore High Court.

“It will be devastating for us since the CNG sector is already in great trouble due to the repeated disruptions in supply, pricing, non-import of the liquefied natural gas etc. It seems impossible,” he added.

On the other hand, the company has informed the Pakistan Stock Exchange and the Securities and Exchange Commission of Pakistan about the background of the case and the court’s decision.

“In accordance with Section 96 of the Securities Act 2015 and Clause 5.6.1(a) of PSX regulations, we hereby convey to you that while determining the [re-gasified liquefied natural gas (RLNG)] prices, the regulator, since August 2020, has diverged from the decision of the Economic Coordination Committee of the cabinet and started applying consolidated system gas UFG benchmark on the RLNG consumers of the distribution segment. The regulator, however, didn’t consider the fact that the benchmark of the system gas consumers is a consolidated benchmark and is applicable to both transmission and distribution consumers, therefore, cannot be applied to one segment i.e. distribution only,” the company stated in a letter written on Monday.

It said the company, being aggrieved by the regulator’s decision, filed a petition in the court challenging the RLNG price determination. “On July 19, Monday the honorable court concluded the case after hearing both the parties at length and announced in the open court that the SNGPL’s petition is allowed,” it added.

The decision, according to the letter, will however not impact the financial results already delcared for the first quarter that ended on Sept 30, 2020 as the company was confident of a favourable decision.

Talking to Dawn, an official source said the decision would not impact the domestic consumers as they were already receiving gas on subsidised rates. Similarly, all five zero-export sectors (that consume majority of the industrial supplies) will also not be impacted by this decision as they were already being provided RLNG on subsided rates.

“However, there will be a very marginal impact on some industrial sectors that consume low volumes,” he added.

According to another official source, Ogra while determining the RLNG price had reduced the UFG benchmark to 6.3pc for distribution and 0.3pc for transmission instead of allowing the actual UFG as per past practice in line with the policy guidelines of the federation.

“This price was applicable from Aug 20 resulting in undue financial burden on the company. Being aggrieved from the Ogra determination, we approached the high court that allowed the SNGPL petition,” he said.

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