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Industry warns move will collapse competition, burden consumers
BeNewz Report
The private sector has strongly opposed Sui Northern Gas Pipelines Limited’s (SNGPL) request for up to a 50 percent increase in gas transportation tariffs, warning that the move would undermine the competitive market opened by the regulator and place additional burdens on consumers. Industry representatives called instead for liberalizing the gas market in line with Prime Minister Shehbaz Sharif’s vision of consumer relief.
During a public hearing held by the Oil and Gas Regulatory Authority (Ogra) on Monday, stakeholders criticized SNGPL’s proposal, pointing to mismanagement, rising operating costs, and worsening gas shortages. Ogra Chairman Masroor Khan said the regulator’s role was to balance consumer and investor interests, noting that Rs84 billion in expenditures had already been disallowed for SNGPL and Rs57 billion for SSGC in recent years to provide relief.
Despite a shrinking gas supply, SNGPL’s operating expenses rose from Rs66 billion in 2019–20 to Rs94 billion in 2023–24, while profits almost doubled to Rs38.9 billion during the same period. Stakeholders argued that these profits reflected an unfair return mechanism disconnected from operational performance.
The CEO of Universal Gas Distribution Company Limited (UGDCL), Ghyas Paracha, rejected SNGPL’s proposed tariff increase, warning that such a move would collapse private participation and strengthen SNGPL’s monopoly. He urged Ogra to conduct performance audits of state-owned utilities, establish uniform benchmarks for unaccounted-for gas (UFG), and revamp the legal framework governing UFG practices.
Paracha further called for structural reforms, including adopting a multi-supplier and multi-buyer model, maintaining separate accounting systems for transmission, distribution, and sales, and replacing the asset base return formula with a fixed per-MMBTU margin. He also proposed introducing a multi-year fixed tariff indexed to inflation, reviewed annually under Ogra and NGT rules.
Representing the All Pakistan Textile Mills Association (APTMA), Asim Riaz backed 100 percent market liberalization and removal of supply caps on private players. He highlighted that LNG clients did not face UFG issues and therefore should have separate benchmarks. He also criticized the diversion of LNG cargoes, saying domestic consumers faced shortages even as LNG was used to replace coal in the power sector.
The LNG glut has worsened the gas crisis, leading Prime Minister Shehbaz Sharif to seek diversion of LNG cargoes from Qatar, while local industries and households face shortages and load-shedding. Stakeholders warned that the current framework threatens both supply stability and consumer affordability.
SNGPL officials defended their position, arguing that the utility lacked the authority to set retail gas prices and that end consumers were already bearing cross-subsidy burdens. General Manager Operations Saqib Abbas called for shifting the subsidy burden onto private shippers.
Analysts say the dispute underscores the urgent need for structural reforms in Pakistan’s gas sector. Without changes to the tariff regime and market liberalization, reliance on state-run utilities with rising costs and declining supply risks deepens the crisis.
The outcome of Ogra’s deliberations will shape the balance between protecting consumers, ensuring fair competition for private suppliers, and maintaining financial sustainability for the state-owned utility.
