PC proposes 15 pc gas surcharge every 3 months

Khalid Mustafa
ISLAMABAD: The government is considering a proposal to impose 15 percent fuel equalisation surcharge on gas, to be levied every three months, to help narrow the gap between the price of gas and other fuels, such as petrol, diesel and furnace oil.

The proposal has been prepared and approved by the Deputy Chairman of the Planning Commission (PC), Dr Nadeemul Haq, and has been sent to the Economic Coordination Committee (ECC) for final approval. When contacted, Planning Commission Secretary, Sohail Ahmad, confirmed that the proposal had indeed been sent to the ECC and it was up to the committee to approve or reject it.

Sources say Federal Minister for Petroleum and Natural Resources, Dr Asim Hussain, is opposing the proposal. His ministry is also working on the rationalisation of gas prices for various sectors of the economy.

But many economic experts support the proposal furnished by the PC keeping in view the increasing gas shortages across the country as well as massive wastages by non-productive sectors.

“A rational increase in gas price will not only stall the massive use of gas but also reduce the tension between the federating units, which has emerged because of unequal gas loadshedding,” said an expert. “Right now in Balochistan, Sindh and Khyber Pakhtunkhwa, there is no gas loadshedding; gas shortage is occuring only in the Punjab, where it had swelled to an unprecedented level of 1.5 bcfd (billion cubic feet gas per day) in January 2011.”

To avert the gas deficit, it is necessary to bring the gas prices closer to the prices of alternative fuels. “If the 15% fuel equalisation surcharge is imposed every quarter, in one year’s time, the gas price for the domestic sector, which is at Rs451.78 per MMBTU i.e. currently 20% of alternative fuel, will increase to Rs790.17 per MMBTU, which is 36% of alternative fuels,” explains one expert.

Similarly, the gas price for commercial consumers, which stands at Rs542.60 per MMBTU, currently 25% of alternative fuels, will increase in one year to Rs949 per MMBTU, which is 53% of alternative fuels.

The gas price for the industrial sector stands at Rs379.43 per MMBTU, currently at 30 percent of alternative fuel, and will be jacked up to Rs663.62, 47% of the alternative fuel. Likewise, the gas price of CNG stands at Rs542.60 per MMBTU, currently 44% of the price of alternate fuel, but will increase up to Rs949 per MMBTU, 77% of alternative fuel, under the PC proposal. “If the said surcharge is applied on gas, the government will have extra revenue of Rs80 billion in one financial year,” said an expert.

As for gas shortages, under Article 158 of the Constitution, gas producing provinces, after meeting their gas requirement, have to give the remaining gas to provinces where gas is not produced on large scale. The Punjab is experiencing a five-day gas holiday a week (3 days for industrial and 2 days for the CNG sectors) even in summer months because of which the unemployment rate in the province has risen to 40 percent. Because of this, the business community has also started to switch over their industries to provinces where gas is readily available.

“If this continues, the Punjab’s economy will be ruined,” says a PC insider. “This is part of the greater game to deprive the Punjab of gas but will end up destroying its economy. To control this, it is necessary to bring the gas prices closer to the prices of alternative fuels. Pakistan cannot afford to further delay improvement in the gas supply side when we are already in the middle of an energy emergency. The concerned ministry should implement the project to import LNG without following the PPRA rules. The chief executive of the country needs to set aside the PPRA rules to immediately implement the project and import LNG at fast track,” said an expert.

Sources say the Ministry of Petroleum and Natural Resources also needs to initiate the plan to reduce unaccounted for gas (UFG), whose volume has increased to over 10% ($2 billion) because of theft and leakage. The government also needs to place a ban on the expansion of the new gas connectivity net and make gas available for the Punjab’s industry and power sector.