Sui Northern Gas Pipelines Limited (SNGPL) Contract for the Supply of LPG Air Mix for Domestic Use

At Josh and Mak International, we aim to provide our clients with clear and comprehensive insights into critical legal documents and agreements. Here, we present an in-depth examination of the Sui Northern Gas Pipelines Limited (SNGPL) Contract for the Supply of LPG Air Mix for Domestic Use, as of February 23, 2024. This contract outlines the terms and conditions under which SNGPL supplies LPG Air Mix, also known as Synthetic Natural Gas (SNG), to domestic consumers. Below, we detail the key components of this contract, ensuring that our clients are well-informed of their rights and obligations.

Key Elements of the Contract

1. Supply Basis
   • The supply of LPG Air Mix is provided on an “As and When Available” basis, meaning there is no guaranteed continuous supply. This ensures that consumers are aware of the potential variability in availability.
2. Definition of Gas
   • For this contract, “Gas” refers to LPG Air Mix or Synthetic Natural Gas (SNG), which will be supplied to the consumer.
3. Consumer Details
   • The contract requires detailed information about the consumer, including name, CNIC number, address, and contact details. This information is crucial for billing and service purposes.
4. Security Deposit and Service Line Charges
   • Consumers are required to pay a refundable security deposit of Rs. 18,000, which may be adjusted based on gas price changes and consumption patterns. Additionally, non-refundable service line charges are levied based on the size of the property.
   • Service-line Charges:
     • Rs. 1500 for houses on plots up to 10 marlas (300 square yards).
     • Rs. 3000 for houses on plots larger than 10 marlas (300 square yards).
5. Price and Billing
   • Consumers are billed at rates recommended by the Federal Government and notified by OGRA. A minimum charge equivalent to the price of 0.4 HM3 volume of natural gas is applied if consumption falls below this level.
   • Meter Rent: Consumers pay monthly rent for the gas meter, which is subject to revision with OGRA’s approval.
   • Other Charges: Consumers must pay all applicable taxes, government levies, and charges imposed by OGRA or other competent authorities.
6. Meter and Property Responsibility
   • SNGPL retains ownership of the infrastructure up to the property line, while consumers are responsible for internal piping and its maintenance post-meter installation.
7. Installation and Maintenance
   • The installation of the internal piping, termed as the houseline, must be tested for safe operation by licensed contractors. SNGPL reserves the right to inspect the houseline for compliance with safety standards.
8. Billing and Payment
   • Gas bills are issued monthly and must be paid within 15 days of issuance. Late payments incur a surcharge of 10%. In case of any discrepancies, adjustments are made in subsequent bills.
9. Disconnection and Reconnection
   • SNGPL reserves the right to disconnect supply for non-payment, tampering with the meter, or other violations of the contract. Reconnection requires payment of all dues and reconnection charges.
10. Consumer Indemnification
    • Consumers are responsible for any loss or damage resulting from gas usage and must indemnify SNGPL against all claims arising from such incidents.
11. Contract Termination
    • The contract can be terminated for non-payment, unauthorized use, or any breach of contract terms. The consumer is liable for all dues up to the date of disconnection.
12. Dispute Resolution
    • Any disputes arising from the contract will be referred to OGRA for resolution in accordance with the OGRA Ordinance, 2002.
13. Landlord’s Permission and Responsibility
    • If the premises are rented, the landlord must provide written permission for the gas connection and undertake to clear any outstanding dues in case of tenant default.

Critique and Considerations

While the SNGPL contract provides a comprehensive framework for the supply of LPG Air Mix, there are several points that consumers and stakeholders should consider:

1. As and When Available Basis:
   • The non-guaranteed supply can be problematic for consumers who rely heavily on a consistent gas supply. Consumers should plan for alternative energy sources during potential supply interruptions.
2. Security Deposit and Service Charges:
   • The refundable security deposit and non-refundable service charges might be substantial for some consumers. Transparent communication regarding any revisions in these charges is crucial to avoid disputes.
3. Responsibility for Internal Piping:
   • The consumer’s responsibility for the internal piping and its maintenance can lead to additional costs and liability. Ensuring compliance with safety standards is essential to mitigate risks.
4. Billing and Payment Terms:
   • The strict billing and payment terms, including the surcharge for late payments, necessitate timely and accurate bill payments by consumers. Any errors in billing should be promptly addressed.
5. Disconnection Policies:
   • The policies around disconnection for non-payment or tampering can lead to significant inconvenience. Clear communication and consumer education on these policies can help in reducing instances of disconnection.
6. Indemnification Clause:
   • The broad indemnification clause places significant responsibility on the consumer. Consumers should understand the implications and ensure adequate safety measures are in place to prevent accidents.

Fairness Analysis of the SNGPL Contract for the Supply of LPG Air Mix for Domestic Use

The contract between Sui Northern Gas Pipelines Limited (SNGPL) and the consumer for the supply of LPG Air Mix for domestic use contains a comprehensive set of terms and conditions designed to govern the relationship between the supplier and the end user. Below is a critical analysis of the fairness of this contract from both the consumer’s and the company’s perspectives.

Fairness for the Consumer

1. Supply on As and When Available Basis:
   • Critique: The provision that the supply of LPG Air Mix is on an “As and When Available” basis could be seen as unfair to consumers who rely on consistent fuel supply for their daily needs. This clause places the burden of supply variability entirely on the consumer, without any guarantees from SNGPL.
   • Suggestion: Consumers would benefit from clearer commitments regarding supply stability or alternative arrangements during interruptions.
2. Security Deposit and Service Charges:
   • Critique: The requirement for a substantial security deposit (Rs. 18,000) and non-refundable service line charges (Rs. 1500 – Rs. 3000) can be financially burdensome. Additionally, the potential for these charges to be revised can create financial uncertainty for consumers.
   • Suggestion: Transparency in how these charges are determined and periodic reviews to ensure they remain fair and reasonable could enhance consumer trust.
3. Billing and Payment Terms:
   • Critique: The strict payment terms, including a 10% surcharge for late payments and potential disconnection for non-payment, can be harsh, particularly for consumers facing temporary financial difficulties.
   • Suggestion: Offering flexible payment plans or grace periods could provide some relief to consumers and reduce the likelihood of service interruptions.
4. Responsibility for Internal Piping:
   • Critique: Consumers are responsible for the installation and maintenance of internal piping, which can lead to additional costs and liabilities. This places a significant burden on the consumer to ensure compliance with safety standards.
   • Suggestion: Providing clear guidelines and support for safe installation and maintenance could help consumers manage this responsibility more effectively.
5. Indemnification Clause:
   • Critique: The broad indemnification clause, where the consumer assumes liability for any loss or damage resulting from gas usage, can be seen as heavily biased in favour of SNGPL.
   • Suggestion: A more balanced approach could involve shared responsibilities for ensuring safety and mitigating risks.
6. Dispute Resolution:
   • Critique: The requirement to refer disputes to OGRA for resolution is fair in theory but could be cumbersome in practice, depending on the efficiency and accessibility of OGRA’s dispute resolution process.
   • Suggestion: Streamlining the dispute resolution process and ensuring timely resolutions would enhance fairness.

Fairness for SNGPL

1. As and When Available Basis:
   • Critique: This clause allows SNGPL to manage supply constraints and operational challenges without facing legal repercussions from consumers, providing necessary operational flexibility.
   • Suggestion: Maintaining transparency about supply issues and planning for contingencies can help manage consumer expectations.
2. Security Deposit and Service Charges:
   • Critique: These charges ensure that SNGPL can cover potential financial risks and operational costs, which is reasonable for maintaining service sustainability.
   • Suggestion: Regular reviews and justifications for any changes in these charges would promote transparency and fairness.
3. Billing and Payment Terms:
   • Critique: Strict payment and disconnection policies protect SNGPL’s financial interests and ensure timely revenue collection.
   • Suggestion: Implementing measures to support consumers facing temporary financial hardships could reduce the frequency of disconnections and improve customer relations.
4. Responsibility for Internal Piping:
   • Critique: Holding consumers responsible for their internal piping reduces SNGPL’s liability and operational burden.
   • Suggestion: Providing optional maintenance services, even at a cost, could ensure safety and build consumer trust.
5. Indemnification Clause:
   • Critique: This clause protects SNGPL from liabilities arising from the consumer’s negligence or improper use of gas, which is essential for mitigating legal and financial risks.
   • Suggestion: Clear communication about the responsibilities and safe usage practices can help prevent incidents and claims.
6. Dispute Resolution:
   • Critique: Referring disputes to OGRA provides an impartial platform for resolving conflicts, which is fair and beneficial for maintaining regulatory compliance.
   • Suggestion: Ensuring OGRA’s process is efficient and accessible would benefit both parties.

Conclusion

The SNGPL contract for the supply of LPG Air Mix for domestic use has several provisions that protect the interests of both the consumer and the company. However, the balance of fairness could be improved by addressing some of the critical areas where the terms appear heavily skewed in favour of SNGPL. By incorporating greater flexibility, transparency, and support mechanisms, the contract can achieve a more equitable distribution of responsibilities and benefits. Josh and Mak International recommend ongoing reviews and stakeholder engagement to refine these terms and ensure they meet the evolving needs and expectations of all parties involved.