ECC decides to recover Rs101 billion from gas consumers for LNG pipeline

The move will trigger a hike in gas, electricity tariffs

ISLAMABAD: In what appears to be a move that will further burden consumers, the government on Thursday reaffirmed its decision to recover Rs101 billion from utility consumers for laying a gas pipeline despite the fact that it has already collected over Rs160 billion from customers for the same purpose.

The decision will result in an increase in gas and electricity tariffs as well as an increase in the prices of all goods where Liquefied Natural Gas (LNG) is used as fuel, including fertilisers.



“The Economic Coordination Committee (ECC) of the Cabinet directed the Oil and Gas Regulatory Authority (Ogra) to treat Rs101 billion spending on the construction of North-South gas pipeline for transportation of the LNG as admissible expense and recover it from the consumers through gas tariffs,” said a senior government functionary after the meeting.

The ECC chairman, Finance Minister Ishaq Dar, lost his cool during the meeting when he was reminded by Ogra officials that the government was already charging consumers for laying gas infrastructure.

The cameras recorded Dar snubbing an Ogra official. “Don’t teach me,” he told an Ogra member who tried to stop the ECC from reaffirming a controversial and illegal decision.

The government wants to lay a pipeline with a capacity of 1.2 billion cubic feet from Karachi’s Port Qasim upwards to Punjab for transportation of imported LNG to fuel three LNG-fired power plants, having cumulative generation capacity of 3,600 megawatts (MW).



However, Ogra has already refused to pass on the impact, saying the pipeline should be financed out of Gas Infrastructure Development Cess (GIDC) that the government has been collecting for laying gas infrastructure.

After collecting over Rs160 billion from consumers in the name of laying gas infrastructure, the finance ministry has already utilised the funds for budget financing, revealed sources in the ministry.

According to the finance ministry, the government collected Rs24.1 billion from the consumers under the GIDC alone from July through September of last year.

In September 2015, the ECC approved bank borrowing to the extent of Rs101 billion in favour of Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL), enabling them to carry out augmentation of pipelines for phase-II of the LNG project.

The petroleum ministry had requested the ECC that Ogra be advised that the LNG project must be included in the asset base of gas companies, subject to the condition that the LNG pricing will be ring-fenced and all directly attributable costs will be recovered from the LNG consumers. The ECC approved this proposal.

Since the LNG will be consumed for power generation in Punjab, the cost will also be recovered from electricity consumers, which will also push up the electricity tariffs.

Both the gas utility companies had approached the finance ministry to provide funds from the GIDC pool. However, in May last year, the finance ministry asked the companies to arrange the funds from the commercial banks.

Published in The Express Tribune, January 29^th, 2016.