Govt working on a strategy to bring down UFG ratio
ISLAMABAD: The government is working on a strategy to bring down the percentage of unaccounted for gas (UFG) and transform the gas companies into profit-earning and service-oriented entities, a Petroleum Division spokesman said.
The incumbent government from the outset faced a tremendous challenge in the form of financial deficit of over Rs150 billion accumulated by the two Sui companies over a period of last five years.
Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) were forced by the successive governments to maintain low tariff for consumers especially domestic to get maximum political mileage.
This artificial price management coupled with systemic inefficiencies had seriously undermined these public sector enterprises to deliver sustainable and economically viable services to the general public.
The prime minister, after taking stock of the challenge, directed that the corporate bodies under the petroleum ministry must be administered as per best corporate governance principles.
In line with this vision of the government, the boards of all companies under the Petroleum Division were reconstituted and known industry professionals were inducted as members. These boards were tasked to appoint best available professionals as MDs/CEOs of the companies.
The spokesperson for Petroleum Division said the division had actively engaged with all key stakeholders – OGRA, board of directors (BoD) and managements of the both companies to come up with out of the box solutions to reduce the burden of high gas prices on the most vulnerable section of society.
Both Sui companies were incurring gas losses (UFG) in double digit which far exceeds the best international practices. One percent UFG loss of both Sui companies in monetary terms exceeded Rs4.
The government was asking Sui companies to curtail UFG losses or reduce allowed UFG to ensure efficient use of gas.
The Petroleum Division had initiated a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalization of transmission and distribution costs to create some fiscal space for the companies instead of simply resorting to increase in tariffs.
The spokesperson added the Petroleum Division was working to instill new thinking in the way the companies’ business was being run. The Petroleum Division was taking necessary decisions to reinforce accountable corporate governance which discourages rent seeking and corruption and promotes value creation resulting in improved service delivery for the end consumers. – APP