Gas tariffs now under govt focus

ISLAMABAD: Finance Minister Dr Miftah Ismail has directed Petroleum Division to come up with proposals for revision in gas tariffs aimed at rationalization of subsidies between LNG price and indigenous gas price, sources close to Secretary Petroleum told Business Recorder.

These directions were issued at a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet when a summary of Petroleum Division titled “liquidity requirement of PSO and PLL for import of LNG and petroleum products” came under discussion.

Petroleum Division, sources said, briefed the ECC about the case, seeking supplementary allocation/ TSG of Rs.36 billion for the month of June 2022 under the head of Petroleum Division. It was further noted that the allocated amount shall be released to SNGPL against its pending claims in respect of cost of RLNG diversion to domestic sector for setting off the payables of PSO and PLL against RLNG supply.

It was further requested that liquidity requirement of Rs.174 billion for the months of July-September 2022 may also be allocated in the next financial year budget.

Moreover, Petroleum Division agreed to the following proposals of the Finance Division: (i) Finance Division will place the requisite amount in the demand of Petroleum Division, which will ensure that the entire amount is transferred to PSO and PLL, as deemed appropriate, without any deduction by the SNGPL; and (ii) Finance Division will open a separate head for subsidy on LNG supply to domestic sector and the Supplementary Grant/ Technical Supplementary Grant would be adjusted against the SNGPL’s subsidy claims.

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However, during the ensuing discussion, the Secretary Petroleum stated that due to a surge in energy commodity prices in the international market, the import cost of LNG and Petroleum Products had substantially increased. Both PSO and PLL were facing liquidity issues because of delayed/ non-recovery of LNG sales from customers. The financial crunch being faced by PSO and PLL was not only limiting their ability to procure LNG but also facing difficulty in meeting payment obligations of international suppliers. It was highlighted that a tariff differential of Rs. 162 billion had piled up because of diversion of costly LNG to domestic (residential) consumers past 4 winter seasons starting FY 2018-19.

Since the RLNG was diverted, as per the approved policy of the government; therefore, recovery of it may also be funded through the government subsidy.

The Additional Secretary, Finance Division highlighted that some remedial and drastic tariff measures should be taken to avoid build-up of circular debt in gas sector as is the case in power sector. He further contended that fuel subsidies should be rationalized based on fiscal space available in the budget.

The Minister of State for Petroleum also subscribed to the viewpoint of Additional Secretary Finance and stated that revision in gas tariff needs to be considered for rationalizing the subsidies between LNG price and indigenous gas price, and the LNG diverted to domestic sector (residential consumers) for past four winters.

The Finance Minister directed the Petroleum Division to come up with proposals for revisions in gas tariff.

The ECC also approved the proposal of Petroleum Division with respect to allocation of Rs 36 billion as Supplementary/ Technical Supplementary Grant for the month of June 2022 in the head of Petroleum Division against supply of RLNG.

Copyright Business Recorder, 2022