Separate levy on gas consumers likely

MUSHTAQ GHUMMAN

ISLAMABAD: The government is likely to impose a separate levy on gas consumers for development of new infrastructure projects, sources in Petroleum Ministry told Business Recorder.

For this purpose, a 'Gas Infrastructure Development Cess Bill 2011' will be presented before the Cabinet in its meeting on October 12, 2011.

Pakistan is facing acute energy crisis, and the government is pursing multi-pronged strategy to meet the demand-supply gap. Natural gas had a dominant role in the country's primary energy mix with a contribution of about 48 percent. Projected demand supply position of natural gas is as follows:

In 2011-12 supply is 4,172 mmcfd against demand of 5,777 mmcfd, showing a shortfall of 1,605 mmcfd. In 2012-13, supplies will be around 4,372 mmcfd, whereas demand will be 5,995 mmcfd, indicating shortfall of 1,622 mmcfd. In 2013-14, shortfall will be 1,880 mmcfd, followed by 2,495 mmcfd in 2014-15, 3,038 mmcfd in 2015-16, 3,542 mmcfd in 2016-17, 4,000 mmcfd in 2017-18, 4,424 mmcfd in 2018-19, 4,799 mmcfd in 2019-20 and 5,247mmcfd in 2020-21.

The shortfall is widening mainly due to natural depletion of existing resources and increase in demand through addition of new consumers.

Sources said that to bridge the widening demand-supply gap, a number of gas import projects are being pursued, including Iran Pakistan (IP) pipeline project, Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, LNG projects and LPG supply enhancement projects in both public and private sectors.

IP pipeline project will bring in 750 mmcfd gas, the first gas flow of which is expected in 2014. The project involves construction of 781 km gas pipeline from Iran-Pakistan border to Nawabshah to inject the gas into transmission system of the two gas utility companies. Estimated cost of the project is $ 1.250 billion (Rs 108 billion).

The TAPI pipeline project will bring in 1,325 mmcfd gas, first gas flow of which is expected in 2016. The project involves construction of 1,680 km gas pipeline from Afghanistan-Pakistan border to Multan to inject gas into transmission system of the two gas utility companies and onward to Pakistan-India border. Estimated cost of the total project is $ 7.600 billion (Rs 654 billion). Share of each country will be determined later.

LNG import, both in public and private sectors, and LPG supply enhancement projects through local production and imports and supply of synthetic natural gas (SNG)/LPG air mix to the localities where pipeline gas supply is otherwise not economically feasible are also being entertained.

Sources said that in case the required infrastructure is not developed for the gas projects, the GoP would be forced to import liquid fuels which are much costlier as compared to gas. At present, neither the GoP nor Sui companies have adequate funding to implement the above projects and create the required infrastructure.

Gas Development Surcharge (GDS), previously kept for creation of infrastructure and price equalizstion is being distributed to the provinces in accordance with NFC award.

Ministry of Petroleum and Natural Resources has reportedly proposed imposition of a new separate levy/cess which would slightly increase price payable by consumers but would still provide gas at a cheaper price compared to other alternative fuels. This fund would also be utilised to subsidise LPG and/or SNG consumers.

A summary containing above proposals was earlier submitted to the Council of Common Interests (CCI). The CCI while considering the summary allowed withdrawal of the summary with the direction that the Ministry must first ascertain whether the proposal is within the purview of the Council of Common Interests.

Ministry of Law, Justice & Parliamentary Affairs while confirming that Parliament is competent to legislate in the matter has stated that the bill is at a policy level and under Rules of Business, 1973 the approval in principle of the Cabinet is a prerequisite for vetting by Law Division.