Unaccounted for gas losses in SNGPL and SSGC currently range between 8.5% and 10.5% respectively, or over 300 MMCFD. PHOTO: FILE
In what was likely its last meeting, the incumbent federal cabinet passed the Rs5.5 billion burden of pilfered gas onto the country’s nearly 6.5 million honest consumers on Thursday – a move which some allege was taken in the interest of shareholders in gas distribution companies.
The cabinet also revised the budget for the current fiscal year along with announcing a Rs16 billion subsidy on tube-wells and allowing the import of prohibited-bore firearms.
Briefing the media after the meeting, Minister for Information and Broadcasting Qamar Zaman Kaira said the government had decided to provide interim relief to gas distribution companies by passing the losses worth Rs5.5 billion onto consumers. He added that a third-party evaluation would be carried out to determine the fate of the remaining losses faced by the gas distributors.
According to analysts, the decision will improve the balance sheets of the Sui Northern Gas Pipeline Limited (SNGPL) and the Sui Southern Gas Company (SSGC) which will subsequently increase the share prices of both companies, benefitting existing shareholders.
The Ministry of Petroleum and the Oil and Gas Regulatory Authority (Ogra) had been at loggerheads over the recovery of Rs11 billion, lost on account of pilfered gas in Khyber-Pakhtunkhwa (K-P) and Balochistan, from honest consumers in Punjab and Sindh. The ministry wanted to transfer the entire burden onto consumers.
Unaccounted for gas losses in SNGPL and SSGC currently range between 8.5% and 10.5% respectively, or over 300 MMCFD.
Budget strategy paper
The federal cabinet also approved the Budget Strategy Paper for 2013-16, which revises the current fiscal year’s budget just eight months after it was approved by Parliament in addition to setting guidelines for coming years.
Through the paper, the cabinet approved an 8% increase in the total size of the federal budget. Against the Rs2.96 trillion budget approved by Parliament, the revised budget now stands at Rs3.195 trillion. The Rs235 billion overrun is largely due to massive power subsidies, overshooting in interest payments, defence spending and discretionary spending by Prime Minister Raja Pervaiz Ashraf.
Subsidies have been revised to Rs364 billion against Rs237 billion in the original budget, while defence spending has been increased to Rs570 billion from Rs545 billion. Interest payments, meanwhile, have been estimated at Rs1.1 trillion against the previous estimate of Rs926 billion.
The budget deficit has now been estimated at 6.5% of Gross Domestic Product (GDP) or Rs1.53 trillion, against the Parliament-approved target of 4.7% or Rs1.1 trillion. Independent analysts maintained the revised estimate is still understated and assessed the gap between expenditure and income at 8.5% of GDP.
Both Kaira and Finance Minister Saleem Mandviwalla avoided questions on undermining the sanctity of the budget and using Parliament as a rubber stamp each year at the time of its approval. The finance minister insisted that contrary to criticism, the incumbent government was leaving the economy in ‘good shape’ – a claim contrary to what the cabinet was told.
The document submitted to the cabinet states, “Pakistan’s economic situation remains fragile….the fundamental short-term risk is sustainability of foreign exchange reserves.”
During the press conference, Mandviwalla also claimed that the government has achieved all macroeconomic targets, while the document revealed that apart from inflation, all targets will be missed again this year.
Subsidy on tube-wells
The information minister also confirmed the approval of a Rs16 billion subsidy on tube-wells in order to provide relief to farmers.
Analysts have termed the subsidy a ‘desperate attempt’ to appease Pakistan Peoples Party’s (PPP) large rural vote bank.
The information minister also revealed the cabinet lifted the ban on the import of prohibited-bore firearms. He said the decision was taken to counter the smuggling of weapons.
Published in The Express Tribune, March 8th, 2013.
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