KATI opposes SSGC’s plea for Rs921bn ERR approval

ISLAMABAD: The Korangi Association of Trade and Industry (KATI) has strongly opposed Sui Southern Gas Company Limited’s (SSGCL) petition seeking approval of an estimated revenue requirement (ERR) of Rs921 billion for FY2026-27, terming it unjustified, inefficient and detrimental to industrial consumers. In its detailed submission to the Oil and Gas Regulatory Authority (OGRA), KATI argued that the gas utility’s financial claims reflect structural flaws in Pakistan’s gas regulatory framework, excessive cost escalations, and an unfair burden on industry through cross-subsidies. KATI, representing industries in Karachi’s Korangi Industrial Area, maintained that SSGCL’s petition lacks transparency and efficiency, pointing out a fundamental contradiction: gas volumes are declining while costs are sharply increasing. According to the submission, gas throughput fell by 9. 4 percent, yet operating expenses surged by over 108 percent—raising serious concerns about cost management. READ MORE: ERR determination: KATI contests core points of gas company petition The association emphasized that a gas utility should function as a transmission company, not a commodity trader. It argued that SSGCL’s integrated model—combining procurement, transmission, and sale of gas—creates inefficiencies and obscures actual costs. KATI urged OGRA to transition towards a transportation tariff model, allowing open access to pipelines and competitive gas procurement. One of the strongest objections raised by KATI relates to SSGCL’s claim of Rs 312 billion as interest on Gas Development Surcharge (GDS) receivables. The association termed this claim illegal and unjustified, arguing that it represents a dispute between the company and the federal government, not a cost to be passed on to consumers. KATI stated that consumers have already paid the surcharge and should not bear additional financial burden due to government payment delays. KATI also rejected Rs 16. 35 billion claimed as Balochistan revenue shortfall adjustment and Rs 2. 3 billion for LPG air mix projects, asserting that these are policy-related subsidies that should be funded by the government, not industrial consumers. The association also raised concerns over a massive Rs 545 billion prior year shortfall, calling for independent audit and deferral until pending review petitions are resolved. It warned that immediate recovery would drastically increase gas tariffs and harm industrial competitiveness. KATI criticized the existing 21. 25 per cent Return on Assets (RoA) model, arguing that it incentivizes excessive capital expenditure rather than efficiency. The submission highlighted that SSGCL’s asset base has increased significantly despite declining gas volumes, leading to higher guaranteed returns without corresponding service improvements. Another major concern is Unaccounted-for- Gas (UFG), which stands at 11. 89 percent—far above international benchmarks of 3 to 6 percent. KATI urged OGRA to revise the benchmark and enforce stricter efficiency targets, noting that excessive gas losses ultimately burden paying consumers. The association further pointed to a sharp rise in financial charges—from Rs146 million to over Rs14 billion—terming it evidence of poor working capital management. It also opposed recovery of Rs 7. 68 billion in doubtful debts, stating that collection inefficiencies should not be transferred to consumers. KATI strongly criticized the prevailing cross -subsidy regime, under which industrial and commercial consumers pay significantly above cost to subsidize domestic and power sector users. It warned that such pricing distortions are eroding Pakistan’s industrial competitiveness compared to regional economies. To address these challenges, KATI proposed wide-ranging reforms, including: (i) transition to a price-cap or revenue cap regulatory model; (ii) separation of gas transportation from commodity pricing; (iii) direct government funding of social subsidies; (iv) independent audit of past shortfalls; (iv) reduction of UFG losses to international standards; and (v) strict scrutiny of capital expenditures and financial costs. The association also called for deregulation of the upstream gas sector to encourage investment, stating that Pakistan’s declining gas production is primarily due to policy and pricing constraints rather than resource scarcity. In its concluding written arguments, KATI urged OGRA to reject unjustified cost claims, protect industrial consumers, and initiate structural reforms to ensure a transparent, efficient, and investment-friendly gas sector. Copyright Business Recorder, 2026

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