ISLAMABAD: In a move aimed at making affordable the government's plan to use imported Liquefied Natural Gas (LNG) for supplementing dwindling gas supplies, it was decided on Wednesday to significantly lower taxes on its import.
The Cabinet’s Economic Coordination Committee decided to lower the general sales tax on LNG by 70% to just five per cent. The standard GST rate is 17%. Further, the imported fuel will also be exempted from Gas Infrastructure Development Cess (GIDC).
The action is expected to reduce woes of Punjab’s CNG sector besides saving thousands of jobs.
The major beneficiary of the decision will be CNG stations of Punjab and Islamabad Capital Territory that remain closed three to four days a week due to non-availability of gas. There are over 2,500 CNG filling stations in Punjab, providing jobs to thousands of people.
“The decision has been taken to facilitate the public and encourage investment in the sector,” said Finance Minister Ishaq Dar.
He added the government could not allow total exemption from general sales tax, as it wanted to promote tax culture in Pakistan.
“If the business is thriving, there is no harm in contributing a small percentage to the exchequer,” he added.
The country is facing acute gas shortage and most of the industries remain shut in winters. But the benefit of this move will not be witnessed anytime before February 2015 when the first shipment of LNG is expected with a specialised terminal to handle LNG consignments still under construction.
The ECC further directed the Ministry of Petroleum, Natural Resources and Oil and Gas Regulatory Authority to mutually workout Gas Pipeline Infrastructure Development Plan in wake of the LNG imports and anticipated indigenous supplies.
The Port Qasim Authority was allowed by the body to buy or lease four LNG compatible tug boats from its own resources, while also giving permission for their commercial usage on cost recovery basis.
Dar, who is also the chairman of ECC, directed that the boats should be made available before January 7, 2015 as LNG shipments are due by then.
The ECC also approved a proposal moved by the Cabinet Division for amendment in the Oil and Gas Regulatory Authority Ordinance of 2002, which was aimed at monitoring and establishing prices of all refined oil products in the country.
After the ECC’s clearance, the proposed draft will be bill tabled in the Council of Common Interests – the highest constitutional body dealing in inter-provincial matters and is headed by Prime Minister Nawaz Sharif.
The amendments proposed include monitoring petroleum prices in the market, among others.
The amendments will also give OGRA the authority to determine gas prices, without public hearing under certain specified conditions – a move that is contrary to the spirit of transparency and will allow the regulator to quietly pass on various charges to consumers.
The amendments also deal with imposition of fines and penalties, and determining and notifying the maximum sale prices of CNG to be charged by a licensee from a consumer for vehicular use.
0.185 million tonnes of urea to be imported
The ECC also gave its consent to a proposal moved by the Ministry of Industries and Production for directing Trading Corporation of Pakistan to procure 0.185 million Tons of urea under SABIC facility by December 15, 2014 for the upcoming Rabi crop.
The balance quantity of 0.385 million tons may be imported as soon as possible from open international market. It is expected that it will be imported at a cost of $123.92 million.
The government would have to extend subsidy worth Rs4.19 billion.
On a proposal moved by the finance division, the ECC has allowed Packages Limited equity investment abroad through a special purpose vehicle in Mauritius with initial remittance of $100,000. However, it restrained the equity, investment would not exceed $15 million.
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I keep reading reports that first consignment of LNG would arrive in Pakistan in January/February 2015 and all other related facilities should be made ready by then.
I think reporters must understand before reporting that LNG stands for Liquified Natural Gas and this liquefaction is achieved through compression at high pressures under refrigeration. Not many companies around the world are capable to engineer or produce equipment for this service. A project of this sort requires about 5 years to get completed due to long delivery items like compressors, heat exchangers, loading and unloading arms, Horton spheres at site including special terminals at the port and gasification area. An LNG terminal in Pakistan is still under discussion. it is true that specialised LNG vessels can now be rented by receiving facilities need to be ready to unload LNG.
I wish you do a bit of research on this before reporting this story in future.
Could someone explain as to what is an LNG compatible tug boat ?........that PQA has been allowed to buy or lease.