As competing lobbies intensify their quest for limited gas resources, the federal government has approved, in principle, a proposal to allocate imported liquefied natural gas (LNG) to compressed natural gas (CNG) filling stations teetering on the verge of collapse.
In its meeting on Thursday, the Economic Coordination Committee (ECC) of the Cabinet directed government ministries concerned to work out the price modalities of LNG being consumed in vehicles.
The ministry of petroleum and natural resources had brought an incomplete summary for ECC consideration that carried neither the price mechanism details nor the financial implications of the proposal on the exchequer, according to the officials who attended the meeting.
The move to allocate imported LNG to CNG filling stations is aimed at saving the CNG industry which has invested Rs450 billion but is on the brink of financial collapse, especially in Punjab.
ECC has constituted a committee comprising finance and petroleum secretaries and the Federal Board of Revenue (FBR) chairman which will calculate the fiscal and financial impact of the proposal and bring it in the next ECC meeting for final approval.
The ministry of petroleum has sought fiscal incentives, including exempting imported LNG from sales tax and gas infrastructure development cess (GIDC), to make it affordable and keep a 30% difference between prices of petrol and CNG. Currently, all bulk buyers of natural gas are paying GIDC at the rate of Rs300 per million British thermal units (mmbtu) and 17% sales tax.
Pakistan hopes to receive the first supplies of LNG in March next year, although it has yet to finalise a supplier. In the first year, it is expecting 200mmcfd per day LNG supplies that in the second year are expected to increase to 400mmcfd.
The government wants to provide cushion to the CNG industry with which about 300,000 skilled and unskilled workers are directly associated and 150,000 people are indirectly related, according to industry people. At present, about 3.7 million vehicles, equipped with CNG conversion kits, run on gas. The government is currently providing gas to the CNG filling stations for only 72 hours per week due to increasing demand of domestic, power and industrial sectors.
The shrinking natural gas supplies are increasing competition among various lobbies.
On a summary moved by Ministry of Textile Industry for priority in gas and electricity load management, the ECC directed the textiles and petroleum secretaries to discuss the issue mutually and decide further details, subject to the availability of gas for the export oriented sector.
The ECC advised petroleum ministry to submit LPG Production and Distribution Policy 2014. before the Council of Common Interests (CCI).
ECC chairman Finance Minister Ishaq Dar advised all representatives of ministries to discuss the issues on which they have opposing views first among themselves and then come to ECC only for the final endorsement of a well-prepared proposal. The petroleum ministry had sought to reverse the decision taken by the Musharraf administration to deregulate the LPG business.
In the proposed policy, it was considering setting the LPG price in a bid to provide relief to the consumers. According to the proposal, locally produced LPG would not be consumed in vehicles and industries. Accordingly, LPG fuel stations as well as industry will have to use imported LPG.
Published in The Express Tribune, September 12th, 2014.
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