CCI meeting today: Sindh, K-P to resist increase in gas tariff

Fear price rise may lead to reduction in their share of gas surcharge.

ISLAMABAD: The Council of Common Interests (CCI) – an inter-provincial body – is likely to accord approval to a planned hefty increase in gas tariffs in its meeting on Wednesday, which will invite fierce opposition from some provinces.

Khyber-Pakhtunkhwa and Sindh will resist the increase in gas prices, which may lead to a sharp decline in their share of gas development surcharge.

Officials familiar with the developments said the Ministry of Petroleum and Natural Resources had tabled a summary, seeking amendments to the petroleum policy of 2009 and 2012 and the model petroleum concession agreement.

After the changes, operators of all new and existing gas fields will receive a higher wellhead price at $6 per million British thermal units (mmbtu) against the existing price range of $1.5 to $4.

In the past, gas exploration companies could take benefit of the new petroleum policy for the existing fields, where gas had not been discovered by then.

Irsa Act

The Khyber-Pakhtunkhwa government has proposed amendments to the Indus River System Authority (Irsa) Act, which may be objected by Punjab and Sindh, as K-P is asking for compensation against the utilisation of its water share by other provinces.

According to the proposal, if a province uses the water share of another province, Irsa should have powers to get compensation for the province whose share has been consumed by the other.

Sindh and Punjab, however, argue that Balochistan and K-P had been protected from the effect of water shortages and if they do not utilise their full share because of infrastructure constraints, others should not be punished for consuming extra water.

Power generation policy

The Power Generation Policy 2015, which the Cabinet Committee on Energy has already approved, will now be tabled in the CCI meeting.

Under the new policy, the government is planning to recover from power consumers the cost of security cover being provided to Chinese engineers and other foreign officials working on energy projects in Pakistan.

Officials said 0.5% of the cost of energy projects would be set aside for security agencies to help them beef up security of transmission lines and power installations and thwart terrorist attacks. In the new policy, the federal government will give exemption from income tax, turnover tax, withholding tax and sales tax and there will be 5% import duty on the plant and equipment not manufactured locally.

LPG prices

The CCI will consider setting aside the deregulation of the liquefied petroleum gas (LPG) business taken by the Musharraf government and could take over control of the market by setting prices, which will lead to a massive reduction in rates.

In the new proposed policy, the government is considering fixing the LPG price at Rs84.6 per kg in a bid to provide relief to the consumers. Marketing and distribution margins are expected to be fixed at Rs25 per kg.

According to the proposals, locally produced LPG will not be consumed in vehicles and industries. LPG fuel stations as well as industry will have to use imported LPG.

The Ministry of Petroleum and Natural Resources has proposed imposition of petroleum levy on LPG by getting the stay orders vacated from courts.

Published in The Express Tribune, March  18^th,  2015.

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