MRS. AYESHA A. MALIK, J.---The instant Petition has been filed under section 12(2) of the OGRA Ordinance, 2002 against the decision dated 18th May 2012 passed by respondent No, 1 (Decision).
2. The basic facts are that the petitioner is a public utility company listed on three stock exchanges with its major shareholding held by the Federal Government being 55.27%. The petitioner has a License for Transmission, Distribution and Sale of Natural Gas (Licenses) issued by the respondent No,
1. In terms of the License, the respondent No,1 makes an, annual determination for the total revenue requirement of the petitioner for that year. The petitioner has impugned the decision of the respondent No,1 with respect to the determination made for UFG, non-operating income and provision for doubtful debt in the Estimated Revenue Requirement for the financial year 2012-2013.
3. The grievance of the petitioner is that the Decision made by respondent No,1 for the Estimated Revenue Requirement for the Financial Year 2012-2013 is not in accordance with, the prescribed procedure; the penalty imposed is not in accordance with the law; the amount determined as penalty is far greater than the prescribed limit; non-operating income cannot be regulated by the respondent No,1 as it does not fall under the scope of regulated activities; that the Human Resource Cost and the provision for doubtful debts were not allowed by the respondent No,1 without consideration of the relevant and necessary factors required under the law.
4. The basic challenge is to the determination for Unaccounted For Gas (UFG) for the FY 2012-2013 which is set at 4.5% by the respondent No,1 in its decision. The petitioner projected its UFG for the FY 2012-13 at 10% and requested that the UFG for the said year be fixed in terms of the 2009-2010 determination wherein the UFG was set at 7%. It is the case of the petitioner that the respondent No,1 did not follow the prescribed procedure and failed to give due consideration to the issues raised by the petitioner whilst rendering its Decision related to UFG.
5. Learned Counsel explained that the Natural Gas Tariff Rules, 2002 (Tariff Rules), Rule 2(m) defines Unaccounted for gas as Unaccounted for gas means in respect of a financial year the difference between the total volume of metered gas received by a licensee during that financial year and the volume of natural gas metered as having been delivered by the licensee to its consumers excluding therefrom metered natural gas used for self-consumption by the licensee for the purposes of its regulated activity and such other quantity as may be allowed by the authority for use by the Licensee in the operation and maintenance of its regulated activity. UFG is therefore a part of the tariff as determined by the respondent No,1. The Learned counsel argued that the Oil and Gas Regulatory Authority Ordinance, 2002 ( OGRA Ordinance) requires the authority, respondent No,1 to follow efficient practices and enforce the conditions of the license.
6. One of the grounds for challenge raised by the learned counsel for the petitioner was that the decision of the respondent No,1 was not in accordance with the required quorum. The OGRA Ordinance required a quorum of three members whereas the impugned decision was signed by only two members. However this objection was quickly dispelled by the respondent No,1 with the production of the original decision which was signed by three members. As such now this ground is not sustainable.
7. Learned counsel for the petitioner argued that the procedural requirements have been ignored by the respondent No,1 whilst setting UFG benchmarks. He argued as follows:--
(a) Rule 17(1)(e) of the Tariff Rules requires that UFG Benchmarks are set through yardstick regulation. The Rules contemplate that there be yardstick regulations on the basis of which UFG Benchmarks are set. The respondent No,1 has failed to, follow the procedure and establish the yardsticks regulations which have resulted in an arbitrary exercise of power.
(b) Clause 21.1 of the License requires that the UFG Benchmark is set after consultation with the Licensee. Counsel argued that consultation has to be meaningful and purposeful. He placed reliance on PLD 1996 SC 324 and PLD 2007 SC 323. He argued that the respondent No,1 did not make any meaningful consultation with the petitioner. In fact he argued that the record will show that the said bench marking was done in one go, for seven years, in the year 2005, effective till Financial Year 2011-2012. The case of the petitioner is that for each financial year a fresh benchmark through yardstick regulation is to be determined. For each determination respondent No,1 should consult with the petitioner.
' The learned counsel argued that OGRA circulated a paper dated 12 April, 2012 and in the said paper proposed a benchmark of 5.46% for the said financial year. Yet in the decision the UFG is determined at 4.5%. The learned counsel argued that the arbitrary decision is best illustrated as the authority proposed a IJFG of 5.46% on the 12th April, yet in the decision it came up with a benchmark of 4.5%.
(c) Clause 21.1 of the License also requires that there is consultation with experts for setting UFG Benchmarks. However counsel for the petitioner argued that no expert was consulted. The only time an expert was consulted was on the orders of the Lahore High Court passed in OGRA Petition 1068/2010. The expert recommended a benchmark of 7% however the respondent No,1 rejected the advice. Contention of the learned counsel is that it was rejected as it did not recommend the benchmark desired by the respondent No,
1. Learned counsel argued that the consultation process is to take place every year when the respondent No,1 sets the benchmark.
(d) Benchmarks to be set for each financial year. The law requires all tariff related exercises to be carried out on a yearly basis. UFG Benchmarking has to be done in each financial year and the benchmark for one particular year has no relevance to the benchmarks for the previous years because the factors affecting UFG are numerous and vary from year to year. These factors include the size and age of network (since UFG is higher in large and old networks) the changing ratio between the volumes of bulk sales to_ retail sales (since UFG is higher in 'pipelines meant for the retail sector) expansion of network in remote areas (which causes increased leakages, thefts and monitoring issues) and the general security situation (the petitioners' network exists in the same threatened environment as the rest of Pakistan). However, despite these variable factors, respondent No,1 had illegally set UFG Benchmarks in 2005-2006 for the next 7 years, i.e, up to FY 2011-2012.
' Rule 17 of the Tariff Rules provides for the evaluation criteria for setting of tariff. UFG is a part of the tariff hence the requirements of Rule 17 should be followed. Most important requirement is that the respondent No,1 should strike a balance amongst the criteria specified in Rule 17(1) in order to optimize the benefits. This balancing factor is another requirement which has been ignored by the respondent No,1.
8. The case of the petitioner is that the process as defined by law was not followed by respondent No,l. Hence there is no valid determination for UFG. It is settled law that when law requires something to be done in a certain way, it has to be done in that manner. A OGRA, being a statutory authority, is under a legal obligation to apply and follow the law strictly. Any deviation for the same would render such decisions a nullity.
9. Learned counsel argued that the decision has also been impugned because it has imposed heavy penalties without any default on the part of the petitioner. He argued that a three tier process should be followed for imposing a penalty. First the benchmarks should be set; each year.
Once the benchmarks have been set the authority has to determine whether there has been any breach of the benchmark and to what extent, and then to determine whether the licensee should be penalized. Before such penalty can be imposed the authority has to show cause the licensee; apply its mind to the arguments raised by the licensee; determine whether there was any willful or preventable default on part of the licensee (2004 SCMR 456, PTD 2006 1132, 2004 SCMR 456 = 2004 PTD 1179); determine whether there has been any violation of a law (PLD 2001 SC 201); use a standard of proof of "beyond reasonable doubt" (as penal provisions are quasi-criminal in nature (2010 PTD 534); and apply the principle of proportionality. It was argued that this process is also enshrined in Rule 20(3) of the Tariff Rules. Once the authority has considered all the above factors, and comes to the conclusion that the breach is attributable and relatable to the actions and omission of the licensee, only then, can it impose a penalty through a reasoned order. In the instant case the petitioner was never afforded a proper opportunity to present its defence yet it has been burdened with heavy penalties.
10. The other ground for challenge to the decision is with regard to the quantum of penalty. The OGRA Ordinance under section 6(2)(p) authorizes the Authority to prescribe fines for contravention of the ordinance, rules, regulation, terms and conditions of the license and the decisions of the authority. A penalty has been specifically prescribed by the authority in Rule 20 of the Tariff Rules which lays down that a maximum of Rs,2 million per day for a continuing breach totalling Rs,730 Million for a financial year may be imposed. It was argued that Rule 20 is all encompassing and it includes violation of any Rules/Regulations as well as orders, determinations and even instructions passed by the authority. The penalty which the respondent No,1 has imposed on the petitioner in the instant case is more than Rs,11.782 Billion being fifteen times more than the maximum prescribed by the Rules. It is submitted that a penalty which exceeds the maximum prescribed by law is unlawful (1990 CLC 784, 2005 PTD 1663 and 1984 MLD 468). Even for the maximum of any lawful penalty to be imposed, it should be shown that the acts are such that they warrant that the maximum penalty be levied instead of any other lower figure. Penalty provisions are to be strictly construed in favour of the petitioner (1998 CLC 1278, PLD 2005 Lahore 571 and 2001 PTD 19).
11. The learned Counsel for the respondent No,1 set out his case by explaining the role of the respondent No, 1 . He explained that the respondent No.1 was established under the OGRA Ordinance to act as the regulator for the oil and gas industry in Pakistan. One of its functions is to determine the tariff at which gas should be sold by the petitioner. To set the tariff, the respondent No,1 conducts an annual exercise to determine the Estimated Revenue Requirement (ERR) of the petitioner. The UFG is a component in determining the ERR for each year. When the UFG is high, the ERR is increased, meaning a higher gas price for the consumer. He explained that it has been the endeavor of the respondent No,1 to bring down the UFG rate of the petitioner so as to control the price of gas paid by the consumer. The respondent No, 1 reviews the practices of the petitioner and all factors which affect the loss of gas in transmission so as to ensure that the loss of gas stays at a minimum and if there is loss on account of factors relatable totally to the petitioner or its inefficiency, then the respondent No,1 cannot allow the burden of such inefficiency to be passed to the consumer. He explained that the petitioner was required to control its loss of gas during transmission and that the decision under challenge considered all the factors raised by the petitioner, which were not accepted by the respondent No. 1 .
12. Following up on the role of the respondent No,1, he argued that the determination of UFG is a technical matter which falls within the jurisdiction of the respondent No,
1. He argued that the Court should examine the procedure adopted, to ensure that the decision was made in accordance with law, that due process was followed and that the respondent No,1 has not acted arbitrarily or contrary to the statutory provision of the OGRA Ordinance.
13. He argued that the UFG benchmark was not an annual determination and that the respondent No,1 has carried out extensive research and work in order to set out the benchmarks and yardstick regulations. He argued that the petitioners understanding of yardstick regulation was contrary to Rule 17(1)(c) of the Tariff Rules and the concept of yardstick regulations in general. As per the understanding of the respondent No,1 setting of benchmarks through yardstick regulation means that the respondent No,1 sets standards for the petitioner to keep a control over its gas loss. In this regard a comprehensive exercise of studying international comparative industry along with local conditions is made by the respondent No,
1. Thereafter, the benchmarks are set, which gives the target to be achieved over a period of time. In the instant cases, the benchmarks were set in the financial year 2005-2006 up till the year 2011-12 by an order dated 12-10-2005. He referred to paras 4.2.1.1 to 4.2.1.10 of the order dated 12-10-2005, which he stated was the evidence in data taken by the respondent No,1 when setting the benchmarks. He argued that review of the benchmarks would show that the respondent No,I required the petitioner to progressively reduce its UFG over time. The 2005 Order set out the target for the petitioner for the upcoming years and they were not indicative. They were fixed through an elaborate procedure of benchmarking for UFG through yardstick regulation. He further argued that a fresh benchmark could not be set every year as it would defeat the purpose of this entire exercise as contemplated under Rule 17(1)(c) of the Tariff Rules read with condition 21.1 of the license. That condition 21.1 of the License did not require the respondent No,1 to carry out an annual factual inquiry in order to set an annual benchmark. He argued that annual benchmarking is contrary to the scheme for setting benchmarks under the OGRA Ordinance, the Tariff Rules and the License.
14. Learned counsel argued that the experts and the licensee and other stake holders were duly consulted. The consultation process adopted is meaningful and a great effort is put into studying international standards to achieve efficiency. He argued that the consultation is necessary in order to bring all possible opinion before the respondent No, 1 . However, this consultation does not mean that the respondent No,1 should not exercise its own independent judgment and balance the views of the individuals and experts consulted.
15. His main argument was that the petitioner was required to subscribe to the standards set out by the respondent No,1 for UFG and that the petitioner instead wanted to increase the UFG rate on the basis of a onetime benefit given to it in the financial year 2009-2010. He argued that the respondent No,1 cannot do its job successfully or efficiently if it maintains the UFG. Determined in the year 2009-2010.
16. The respondent No,3 submitted its statement in writing which provided that the Government of Pakistan owns 54% of SNGPL's and 80% of the SSGCL's shares. Out of 14 directors of the boards of both companies, in case of SNGPL, the Government has ten and in case of SSGC it has eleven directors. The efficient running of both these companies, the welfare of its staff and employees as well as providing gas to consumers at competitive and affordable rate, remains priority of Government of Pakistan. That while determining the final UFG benchmark, factors which are beyond the control of companies should also be considered.
17. Heard and reviewed the documents placed before the Court.
18. This is a petition filed under section 12(2) of the OGRA Ordinance, 2002. The petitioner prays for the decision to be set aside to the extent of its findings on UFG, treatment of Non-Operating Income, disallowing HR cost and the provision for doubtful debt. Although several grounds have been urged before this Court and a lot of material has been placed before the Court, the main ground urged is with respect to the procedure adopted by the respondent No,1 in making its Decision related to UFG, Non-Operating Income, HR Costs and doubtful debts. In terms of section 12(2)(a) the petitioner essentially seeks a direction from this Court to the respondent No,1 to refrain from doing anything it is not permitted by law to do or to do that which it is required by law to do.
Therefore, for the purposes of this petition filed under section 12(2) of the OGRA Ordinance this Court shall review the decision making process adopted by respondent No,1 whilst rendering the decision specifically related to matters challenged.
19. The thrust of the arguments raised on behalf of the petitioner was that the process prescribed by law for determining UFG benchmarks was not followed. That the benchmark is an annual determination and that the 2005 benchmarks relied upon were at best indicative. That an annual determination was necessary to keep the benchmark abreast with the ground realities. The ground realities depended upon variable factors which may not be in the control of the petitioner. Such factors included the changing ground realities, the size and age of the network, the changing ratio between the volumes of bulk sales to retail sales, expansion of network in remote areas and the general security situation where the petitioner's network system exists. The learned counsel also gave reference to the critical nature of service also being a factor which should be considered by the respondent No,1 . He argued that the petitioner could not be made responsible for all the factors which affected and increased the UFG. Hence the respondent No,1 should set its guidelines to decide which factors are within the control of the petitioner and which factors are not in its control. To the extent of the UFG determination since the respondent No,1 did not follow any guideline, they failed to appreciate the variable factors and the critical nature of the service provided by the petitioner. Without giving due consideration to the variable factors, the critical nature of the service and without striking a balance between the criteria and by not revising the benchmarks annually the respondent No,1 has set an impossible target which cannot be achieved or maintained by the petitioner.
20. The basic issue for the petitioner is that the benchmark should be an annual determination and that the respondent No,1 should set guidelines to show what factors will be considered while determining UFG benchmarks. In this regard a review of the relevant law is necessary to determine the procedure set by law.
21. OGRA Ordinance: 21.1 Section 7 provides that the Authority shall set the tariff for regulated activities.. Section 7(2) (a to g) provides for the criteria for determination, approval, modification and revision of tariff which shall be prescribed in the rules in the terms and conditions of the license and shall include 7(2) from (a to g).
21.2 Section 8 provides for the pricing for retail consumers for natural gas. In terms of the section the licensee shall submit its total revenue requirement and the respondent No,1 shall determine the total revenue requirement in accordance with the rules.
22. The Natural Gas Regulatory Authority Licensing Rules, 2002 (Licensing Rules) provide in Rule 3 that the Authority while exercising its functions shall as far as practicable look after the interest of the consumer and the licensee along with the nation as a whole. The criteria for approval of the tariff is given in Rule 19(3) which essentially repeats the criteria provided for in section 7(2)(a through g) of the OGRA Ordinance
23. The Natural Gas Tariff Rules 2002 (Tariff Rules) provide for the process to be followed by a licensee for determination of tariff. Rule 4 provides that every licensee shall file its petition by the first day of December of each year, to determine the estimate of the total revenue requirement for one financial year. In accordance with the procedure the petition has to be admitted, notices issued, replies and rejoinders filed and then a hearing by the authority. Rule 17 lays down the evaluation criteria for the Authority to follow whilst determining the Tariff. Rule 17(c) provides that tariff should include a mechanism whereby the licensee can maintain or achieve the benchmarks set by the Authority through yardstick regulation for UFG.
24. The License:- Clause 5 provides that the Authority shall determine tariff or total annual requirement for each regulated activity in accordance with the relevant criteria laid down in the Ordinance and the Rules.
24.1 Clause 21.1 provides that the Licensee shall take all possible steps to keep the UFG within acceptable limits. The Authority for this purpose in consultation with Licensee and experts, shall fix target of UFG for each financial year. The Authority may fix UFG target separately for each regulated activity.
24.2 Clause 21.2 provides that the Licensee shall be entitled to claim the UFG to the extent of target fixed by the Authority under 21.1 for the purpose of determining its revenue requirement for each financial year.
24.3 Clause 21.3 provides that in case the Licensee improves upon the UFG target prescribed by the Authority under Condition 21.1 for any financial year, the Licensee shall be entitled to retain the gain on that account. Conversely if the Licensee fails to meet the UFG target the loss on that account shall be borne by the Licensee and shall not form part of its total revenue requirements.
25. To address the argument that benchmarking should be done annually so that it updates the factors affecting the UFG of the petitioner, I find that there is nothing in the OGRA Ordinance, the Tariff Rules and the Licensing Rules which requires benchmarking to be an annual determination.
Reliance has been placed by the petitioner on Clause 21.1 of the License where it states that UFG shall be fixed for each financial year. Reliance has also been placed on the fact that the ERR is to be determined each year, hence they conclude that the UFG benchmarks should also be determined each year. I am of the opinion that the fact that the ERR is determined annually does not mean that the benchmark should be set annually. Clause 5 of the License when read with Clause 21 of the License clarifies this issue. It provides that tariff is to be determined as per the Ordinance and the Rules on an annual basis.
' For the purposes of determining the UFG component, the authority shall fix targets for each financial year. The licensee can claim UFG to the extent of the target fixed by the Authority for the purposes of determining its revenue requirement for each financial year. If the licensee improves on the UFG target it can retain the gain on that account. If it fails to meet the target then the loss cannot be considered or made part of the total revenue requirement.' To my mind the fixation of the target as contemplated under Clause 21.1 when read with Clauses 21.2 and 21.3 makes it clear that the authority sets a target for the licensee for every year and in terms of the target set, the licensee can demand a profit or suffer a loss in its revenue requirement based on its performance.
There is nothing in the license to suggest that targets should be set annually. Furthermore Rule 17(1) of the Tariff Rules lay down the evaluation criteria for determining tariff. These are the guidelines which are to be followed by the Authority, when determining the tariff. Rule 17(2) requires the Authority to strike a balance between all the criteria provided for in Rule 17(1). Hence the Authority has to consider all the elements given in Rule 17(1) and has to strike a balance between the criteria.
One criteria that has been stressed upon is Rule 17(1)(c) which provides for benchmark through yardstick regulation. For the purposes of UFG, the Authority sets the benchmarks, so that the Licensee can keep a check on its costs, investment and return on assets such that it does not violate the terms of the license and also so that it protects the licensee from being penalized. The word benchmark as used in Rule 17(1)(c) of the Tariff Rules means that the Authority can set a standard against which performance of the Licensee can be measured. Essentially benchmarking is used to measure the Licensee's efficiency against a reference point such that the Authority monitors the Licensee's performance and also sets standards to achieve optimum efficiency.
Yardstick regulations are the indicators set out by the Authority to measure performance for the purposes of bench marking. Ic is a tool used by the, authority to achieve efficiency. Hence benchmark through yardstick regulation is the scheme set out by the authority to motivate optimum performance by the Licensee. Since its object is to incentivize the industry there is no merit in the arguments raised that benchmarking is to be done annually.
26. Admittedly, a low UFG is the desired result. Hence by setting the benchmarks in 2005, the Authority informed the petitioner of what was expected from it qua UFG, over the years, up to 2012.
The benchmarking process was thought through and UFG standards for the next seven years were given to the petitioner. It was now for the petitioner to work towards the standards. In doing so the respondent No,1 has not acted illegally or contrary to the OGRA Ordinance or Tariff Rules or terms of the License. The petitioner also stressed greatly on the fact that the respondent No,1 did not give due consideration to the variable and critical factors which cause a higher UFG. The entire controversy regarding UFG started with the determination for 2009-10. At the time, the UFG was set at 7%. This was a one time ,determination deviating from the given benchmarks. The petitioner uses this determination as a basis to justify and rationalize the fact that UFG rate cannot be lower than the 7%. In response, the respondent No,1 argued that 2009-2010 determination cannot form the basis for removing the targets set and for destroying the objective of reducing the UFG. A review of the decision shows that due consideration were given to the factors advanced by the petitioner which lead to a demand for a higher UFG. The decision also reveals that the respondent No,1 has rejected the factors put forward by the petitioner stating its reasons for doing so. I am of the opinion that it is for the respondent No,1 to determine what factors are relevant and what are not for the UFG. This Court can review the decision making process and cannot direct the respondent No,1 to change its determination where due process has been followed. The respondent No,1 has to exercise its discretion in a way to advance the objects of the OGRA Ordinance, Tariff Rules and Licensing Rules. Therefore benchmarks set in the year 2004-2005 are in accordance with the OGRA Ordinance, Rules and License.
27. On the issue that the respondent No,1 has not set the yardstick regulation on the basis of which benchmarks are set, no case is made out. The respondent No,1 has shown that the yardstick regulations were established with best international practices while accounting for local conditions. The yardstick regulations provide an incentive to the petitioner to perform better and stay within the acceptable limits. Without the yardsticks the benchmarks could not be set. In fact the benchmarks encourage optimum performance, which means that the yardstick regulations are in place. Hence there is no merit that the yardstick regulations are not set by the respondent No,1.
28. On the argument related to the consultation process, Clause 21.1 Provides for a consultation with the licensee and the experts to fix the targets of UFG for each financial year. Admittedly the process of consultation has taken place, but the grievance of the petitioner is that the consultation is an annual process and that the respondent No,1 has rejected the reports filed by the experts and that in doing so they have ignored the meaningful purpose of consultation as provided for under the License. Also argued was the point that the consultation was ignored in an arbitrary manner without cause and that the respondent No,1 first set the UFG at 5.67% and then at 4.7% again without any just cause. Furthermore it was argued that since benchmarking had to be done annually hence the consultation process was to be adopted annually as well. To my mind the arguments raised with respect to meaningful consultation and the law cited does not give credence to the basic argument of the petitioner, being that the respondent No,1 did not rely on any of the reports and advice provided by the experts. The authority is required to maintain a process of open consultation with the experts and the Licensee to set targets to keep the UFG within acceptable limits. E The consultation process is meaningful as it gives the authority the information it requires to set the UFG targets. Clause 21 of the License also provides that the licensee shall take all possible steps to keep UFG within acceptable limits. Therefore, the requirement of consultation is guided by the duty of the Licensee, that is the duty of the petitioner, to maintain UFG within acceptable limits. Clause 21.2 provides that the target shall be fixed by the authority. The evaluation criteria provided in Rule 17 of the Tariff Rules guides the authority in setting its targets. Therefore the consultation provided for in the License is a tool used by the respondent No,1 to regulate the petitioner. Furthermore, admittedly consultation took place. However the grievance of the petitioner is that the consultation process should be undertaken annually and should be relied upon. The decision to set UFG target lies with the respondent No, 1 . It can consider the views of the petitioner and experts, but ultimately it has to set the UFG after evaluating the criteria provided in F Rule 17 of the Tariff Rules. Therefore, open consultation can shape the decision making but it cannot control the decision of the respondent No,
1. As I have already reasoned that clause 21.2 of the License does not require the process of benchmarking to be undertaken each year, in the same way the process of consultation is also not required to be taken each year.
29. The other challenge is to the Human Resource Cost (HRC) and the provision for doubtful debts which were not allowed by the respondent No, 1 . Again the argument is that it was done without consideration and the request of the petitioner was denied. It has been suggested that the respondent No,1 has concluded on the basis of an arbitrary exercise of discretion. A review of the decision reveals that in fact it is a reasoned decision on HR benchmark and doubtful debts. The respondent No,1 has stated in para 9.1.9 of the decision that HR benchmark cost will be fixed after conducting a comprehensive and elaborate study in the matter. Till the final outcome of study, the increase of 10.80% was provisionally allowed, final adjustment to be after implementation of new benchmarks. In view of its findings, the respondent No,1 determined the HR cost at Rs,7.80 million.
Since this is not a final determination and adjustment will be made after the new benchmarks have been determined, therefore, there is no basis to challenge this finding as the basic considerations have to be determined with respect to provision for doubtful debt as per para 9.1.65 of the decision. Furthermore, respondent No,1 has required the petitioner to reduce its provision for doubtful debts, yet the petitioner has not reduced this head. The respondent No,1 has given its findings on the issue, reasoning its decision. There is nothing in the Ordinance, Tariff Rules or License on the basis of which the petitioner can seek a direction to the authority to accept its figures for doubtful debts. This falls within the discretion guided under Rule 17 of the Tariff Rules.
Hence there is no reason to set aside this finding.
30. On the issue of Late Payment Surcharge (LPS), the petitioner has argued that the respondent No,1 before 10-10-2010 used to treat LPS as operating income but after its decision of 15-10-2010, LPS became non-operating income. Since the respondent No,1 has already accepted that LPS is a non- operating income therefore, the decision with respect to. LPS goes against the accepted position of the respondent No,
1. A review of the decision shows that the 2010 decision was a one time allowance which the respondent No,1 did not want to grant any further. In para 7.3.10 of the decision the respondent No,1 has stated that LPS as non-operating income will be considered as part of the new tariff regime under consideration. However presently the existing regime treats it as operating income hence, the respondent No,1 rejected the request of the petitioner. Again, there is no procedural impropriety when concluding on LPS. Hence no reason to set aside the decision related to LPS is made out.
31. Finally on the issue of penalty, the petitioner argues that due process was not followed when imposing the penalty and that the quantum of penalty is not in accordance with the rules. Under the Tariff Rules, Rule 20 provides for the imposition of a penalty. Any licensee who contravenes any' provision of the OGRA Ordinance, Rules, Order, determination, decision, direction or instruction of the authority shall be punishable with a fine, which may extend to one quarter, of one per cent of the annual turnover of the licensee or 20 million rupees whichever is less. If the contravention is continuing with an additional fine, which may extend to one tenth of one per cent of the annual turnover of the licensee or Rs,2 million, whichever is less for every day during which such contravention continue. As per clause 20 (3) a show-cause notice is required so as to give the licensee an opportunity to show cause as to why the penalty should be imposed. The respondent argued that no penalty had been imposed and that the petitioner was interpreting UFG disallowance as a penalty. Hence there was no basis to this challenge. A review of the decision shows that there is no finding on a penalty under Rule 20 of the Tariff Rules. In terms of para 8.2.6 a determination has been made on UFG disallowance. It is this dis allowance factor which the petitioner is interpreting to be a penalty imposed under section 20 of the Tariff. Rules. The decision does not show any working related to imposition of penalty as stipulated by the petitioner. Hence no ground is made out on this count.
32. The role and the functions of the respondent No,1 rests in its ability to make decisions that affect the petitioner's performance when providing a public utility, in this case its sui gas. It was established, as per its preamble, to protect public interest while respecting individual rights and to provide effective and efficient regulation. Section 6(2) of the OGRA Ordinance provides that it shall safeguard public interest, that it shall protect the interest of all stakeholders including consumers and the licensees. An important function of the respondent No,1 is the fixation of tariff and prices for natural gas. A critical element in fixing tariff is the exercise of discretion. The Hon'ble Supreme Court of Pakistan in case "Tariq Aziz-ud-Din and others (2010 SCMR 1301)" has laid down seven points for structuring discretion. In the words of the Hon'ble Supreme Court:-- "Wherever wide worded powers conferring discretion exists, there remains always the need to structure the discretion and it has been pointed out in the Administrative Law Text by Kenneth Culp Davis (page 94) that the structuring of discretion only means regularizing it, organizing it, producing order in it so that decision will, achieve the high quality of justice. The seven instruments that are most useful in the structuring of discretionary power are open plans, open policy statements, open rules, open findings, open reasons, open precedents and fair informal procedure"
The discretion exercised by the respondent No,1 satisfied the test laid down by the Hon'ble Supreme Court of Pakistan. The discretion is not open ended but guided by the OGRA Ordinance, the Tariff Rules and the License Rules. Stakeholders have been consulted including the petitioner and opinions have been reviewed by the respondent No,1. Furthermore, the discretion exercised by the respondent No,1 was after giving due consideration to all the issues raised by the petitioner.
Detailed reasons have been given in the decision for the determinations made. There is nothing on the record to show that the respondent No,1 has acted unfairly, unreasonably or contrary to the law and principles of natural justice. The respondent No,1 has applied its mind and reasoned its Decision. Therefore no case for a direction under section 12(2) of the OGRA Ordinance is made out.
Consequently, this petition is dismissed.