LAHORE - Gas pilferages is the major problem of higher UFG losses and the responsibility solely lies with gas utilities as total UFG losses have increased from 6 per cent to approximately 10 per cent, and OGRA, the chief regulatory body, have shown reservations several times in this regard.

Official sources said that following a major relaxation in Unaccounted For Gas or Loss Units (UFG) in 2010, government is now changing its calculation as cabinet has also given exemption on how to arrive at loss units. This will significantly improve annualised earnings of both the gas utilities.

They said that federal cabinet on the request of SSGC and SNGPL has given relaxation in calculating UFG losses. UFG losses are those units which are not billed or lost during the transmission of gas to the consumers. Since both gas companies facing difficulties to curb these losses which they seem beyond their control, federal cabinet has exempted 1) gas pilferages, 2) loss units against minimum billing and 3) loss units in law and order areas from UFG calculation.

Experts believe that SNGPL will be a major beneficiary of this new change in calculation as company, being the largest utility, has huge losses in all 3 categories in absolute terms.

In FY11 SNGPL recorded UFG loss of 10 per cent (approx 175mmcfd). However, estimates suggest that after the relaxation, UFG of SNGPL will reduce but it will remain slightly higher than maximum allowable UFG limit of 7 per cent.

Similarly, SSGC whose FY11 UFG loss was 8.3 per cent (about 85-90mmcfd) will also reduce.

Thus the recent step will be an icing on the cake where earlier both the gas cos were enjoying UFG relaxation and allowance of treating non operating income as operating they are now further granted change in UFG calculation.

One thing which is not known is whether the new change will be applied from FY12 onwards or whether it will be retrospective. However we have not been able to confirm this as it needs further clarification.