Budget: Govt hopes to fetch revenues of Rs300b from oil, gas industry

Gas infrastructure cess likely to be increased to finance pipeline projects.

ISLAMABAD: The government is expected to fetch revenues of Rs300 billion, excluding general sales tax, from oil and gas companies in the next financial year 2012-13.

Sources told The Express Tribune that out of the Rs300 billion, Rs102 billion was likely to be collected in shape of gas infrastructure development cess on natural gas, Rs120 billion as petroleum levy on oil products, Rs45 billion as royalty on gas and crude oil and Rs30.8 billion as gas development surcharge on natural gas.

The infrastructure cess, levied with the objective of financing gas pipelines including Iran-Pakistan and Turkmenistan-Afghanistan-Pakistan-India projects, will be one of the major sources of revenue for the government with an increase in its rate in the next financial year, starting July. In the current year, the government has estimated to collect Rs40 billion in this head.

According to a plan, the government is considering enhancing the cess rate to Rs300 per million British thermal unit (mmbtu) for fertiliser industry, to Rs300 per mmbtu for CNG stations in region-I and Rs200 per mmbtu for CNG stations in region-II.

There is also a plan to enforce a uniform cess rate for power generation companies, independent power producers (IPPs) and industry at Rs100 per mmbtu in the next financial year.

At present, the cess rate is Rs197 per mmbtu for fertiliser industry, Rs147 per mmbtu for CNG stations in region-I, Rs79 per mmbtu for CNG stations in region-II, Rs27 per mmbtu for gas used by power generation companies, Rs70 per mmbtu for IPPs and Rs13 per mmbtu for the industry.

According to the sources, the government did not receive an encouraging response from international lenders including Russia and China to requests for financing the Iran-Pakistan gas pipeline projects due to sanctions imposed by the US against Tehran. “This prompts the government to generate funds through enhancing the cess on natural gas to fund the IP gas pipeline,” a government official said.

Sources said the Ministry of Petroleum and Natural Resources had earlier proposed an increase in the cess rate from next year but the law ministry turned it down, arguing it could be decided only by the Council of Common Interests (CCI) – an inter-provincial body.

However, Petroleum Minister Dr Asim Hussain later convinced the law ministry, which withdrew its objections and gave the go-ahead, which may lead to collection of a whopping Rs102 billion from the consumers.

According to a senior official of the petroleum ministry, earnings through royalty and gas development surcharge will be distributed among the provinces. However, estimates could vary due to fluctuations in production of gas and oil and sales of petroleum products.

Published in The Express Tribune, June 1^st, 2012.