ISLAMABAD: Ministry of Planning, Development and Special Initiatives (M/o PD&SI) has recommended the government to sever subsidised gas/RLNG supply to export-oriented industry as subsidy on gas and power is not feasible, well-informed sources in Petroleum Division told Business Recorder.
This proposal from M/o PD&SI came at a time when the Petroleum Division had requested Finance Division to release over a Rs 4 billion subsidy against the supply of RLNG to industry till March 2020.
According to the Petroleum Division, the Economic Coordination Committee (ECC) of the Cabinet, in its meeting held on September 17, 2018 while considering a summary on ‘natural gas sale pricing’ decided that gas supply to the industrial sector (exporters of five zero-rated sectors namely, textile, including jute, carpets, leather, sports and surgical goods), in Punjab will be revised from 28:72 to 50:50 for domestic gas and RLNG, respectively. The weighted average gas tariff of such consumers will be US$ 6.5 per MMBTU. Gas price of similar consumers of SSGC and those of SNGPL in KPK will remain unchanged.
Petroleum Division argues that since there is a differential in the sale price of RLNG and indigenous gas whereas supply of RLNG or mix of both at US $ 6.5 per MMBTU would require a subsidy for the export-oriented (zero rated) industry, the ECC of the Cabinet, while considering a summary of October 15, 2018 submitted by Petroleum Division gave the following directives: (i) 100 per cent RLNG shall be provided to zero–rated industry for three months i.e. December to February; and (ii) a blend of system gas and RLNG of 50:50 shall be provided to zero-rated industry for a period of nine months, i.e., March-November.
The sources said the latest budgeted subsidy position furnished by Finance Division indicates that the original budget was of Rs 10 billion of which Rs 8 billion has been released. After expenditure of Rs 1.158716 billion, balance budget amount was Rs 6.8413 billion.
Petroleum Division claims that due to shortage of indigenous gas SNGPL supplied 100 per cent RLNG in March 2020.
Petroleum Division has requested the ECC that the subsidy claim for the month of March 2020 based on 100 per cent supply, amounting to Rs 4.055 billion based on actual verified bill/claim of SNGPL, may be approved for release out of the budgeted allocation for the current financial year and any resultant shortfall in the budgeted allocation at subsequent stage will be met through a supplementary grant.
The sources said a summary has been circulated to the Ministry of Finance, Ministry of Planning, Development and Special Initiatives, Ministry of Commerce and Ministry of Industries and Production for comments. Ministries of Commerce, Industries and Finance have supported the proposal, however, Planning Division maintains that subsidy on gas/RLNG to export sector may be reviewed and discontinued as this sector is availing subsidy both on gas and power supply.
Copyright Business Recorder, 2021
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