Cabinet approves Rs25.75b grant for zero-rated industries
Announces Rs5.5 billion gas subsidy to maintain fertiliser prices at current levels
PHOTO: REUTERS
ISLAMABAD:
The federal cabinet approved on Thursday a supplementary grant of Rs25.75 billion for the provision of subsidy to the zero-rated export-oriented industries and captive power plants consuming re-gasified liquefied natural gas (RLNG).
Additionally, the cabinet approved a gas subsidy of Rs5.5 billion to maintain fertiliser prices at current levels. To minimise the price difference between the imported and local liquefied petroleum gas (LPG), the cabinet further reduced general sales tax from 17% to 10%.
It decided that gas supply ratio to the industrial sector - exporters of the zero-rated industries including textile (including jute), carpet, leather, sports and surgical goods - in Punjab would be revised from 28:72 to 50:50 for domestic gas and LNG respectively.
The weighted average gas tariff for such consumers will be $6.5 per million British thermal units (mmbtu).
The cabinet reversed a decision on allocating system gas to the zero-rated industries solely for the production process only. Now, the subsidised gas will be provided to the zero-rated industries both for production process and electricity generation.
Previously, in view of the electricity shortage, a significant gas volume was required by the industrial sector for power generation, however, after assurance of electricity availability in the system, the subsidised gas was not allocated to the captive power plants.
Minister for Petroleum and Natural Resources Ghulam Sarwar said similar to domestic consumers, industrial consumers were also vital for the country’s economy.
Sui Northern Gas Pipelines Limited (SNGPL) would grant a subsidy of $6.5 per mmbtu taking into account actual gas/LNG consumption by the 536 zero-rated industrial consumers (processing and captive plants).
The subsidy calculation has been projected up to June 2019 amounting to Rs25.75 billion.
At present, a sufficient urea stock is available in the country for the Kharif sowing season and the decision has been taken to grant gas subsidy to urea plants for the Rabi season to ensure adequate feritilier supply at current prices and to discourage producers from reaping a windfall by increasing prices.
“Punjab was not self-sufficient in gas production like three provinces,” he said. “The surplus natural gas produced in three provinces is provided to Punjab. There is no other solution than to provide gas/LNG to domestic and commercial consumers of Punjab.”
The matter would be discussed in parliamentary committees and the cabinet, he said. The minister pointed out that Turkmenistan, Afghanistan, Pakistan and India (Tapi) gas pipeline, Iran-Pakistan gas pipeline and LNG from Qatar were the cheapest sources of energy. “Tapi project can be constructed on a fast track and Iran is ready to negotiate the IP pipeline deal,” he said.
The federal government was ready to renegotiate the LNG deal with Qatar if ongoing investigation by the National Accountability Bureau (NAB), Federal Investigating Agency (FIA) and the Supreme Court found some controversial clauses in the agreement, he said.
The minister added that the Petroleum Division was reviewing agreements of rental power plants (RPPs) and the Reko Diq project.
“Prices of domestic LPG cylinders have already dropped from Rs1,850 to Rs1,410 by adjusting taxes on local and imported LPG,” he said. “On the intervention of the Oil and Gas Regulatory Authority (Ogra), the prices of LPG cylinders have further dropped to Rs1,338.”
Responding to a question, the minister said, “It is the responsibility of provincial governments to enforce the LPG cylinder prices determined by the federal government.” The present government has discovered 105.18 mmcfd of gas and 5,358 barrels per day of oil in Sindh and Khyber-Pakhtunkhwa.
It is also working on a proposal to install LPG-air mix plants in Azad Jammu and Kashmir, Gilgit-Baltistan, Balochistan and other areas of the country.
Published in The Express Tribune, December 7th, 2018.
The federal cabinet approved on Thursday a supplementary grant of Rs25.75 billion for the provision of subsidy to the zero-rated export-oriented industries and captive power plants consuming re-gasified liquefied natural gas (RLNG).
Additionally, the cabinet approved a gas subsidy of Rs5.5 billion to maintain fertiliser prices at current levels. To minimise the price difference between the imported and local liquefied petroleum gas (LPG), the cabinet further reduced general sales tax from 17% to 10%.
It decided that gas supply ratio to the industrial sector - exporters of the zero-rated industries including textile (including jute), carpet, leather, sports and surgical goods - in Punjab would be revised from 28:72 to 50:50 for domestic gas and LNG respectively.
The weighted average gas tariff for such consumers will be $6.5 per million British thermal units (mmbtu).
The cabinet reversed a decision on allocating system gas to the zero-rated industries solely for the production process only. Now, the subsidised gas will be provided to the zero-rated industries both for production process and electricity generation.
Previously, in view of the electricity shortage, a significant gas volume was required by the industrial sector for power generation, however, after assurance of electricity availability in the system, the subsidised gas was not allocated to the captive power plants.
Minister for Petroleum and Natural Resources Ghulam Sarwar said similar to domestic consumers, industrial consumers were also vital for the country’s economy.
Sui Northern Gas Pipelines Limited (SNGPL) would grant a subsidy of $6.5 per mmbtu taking into account actual gas/LNG consumption by the 536 zero-rated industrial consumers (processing and captive plants).
The subsidy calculation has been projected up to June 2019 amounting to Rs25.75 billion.
At present, a sufficient urea stock is available in the country for the Kharif sowing season and the decision has been taken to grant gas subsidy to urea plants for the Rabi season to ensure adequate feritilier supply at current prices and to discourage producers from reaping a windfall by increasing prices.
“Punjab was not self-sufficient in gas production like three provinces,” he said. “The surplus natural gas produced in three provinces is provided to Punjab. There is no other solution than to provide gas/LNG to domestic and commercial consumers of Punjab.”
The matter would be discussed in parliamentary committees and the cabinet, he said. The minister pointed out that Turkmenistan, Afghanistan, Pakistan and India (Tapi) gas pipeline, Iran-Pakistan gas pipeline and LNG from Qatar were the cheapest sources of energy. “Tapi project can be constructed on a fast track and Iran is ready to negotiate the IP pipeline deal,” he said.
The federal government was ready to renegotiate the LNG deal with Qatar if ongoing investigation by the National Accountability Bureau (NAB), Federal Investigating Agency (FIA) and the Supreme Court found some controversial clauses in the agreement, he said.
The minister added that the Petroleum Division was reviewing agreements of rental power plants (RPPs) and the Reko Diq project.
“Prices of domestic LPG cylinders have already dropped from Rs1,850 to Rs1,410 by adjusting taxes on local and imported LPG,” he said. “On the intervention of the Oil and Gas Regulatory Authority (Ogra), the prices of LPG cylinders have further dropped to Rs1,338.”
Responding to a question, the minister said, “It is the responsibility of provincial governments to enforce the LPG cylinder prices determined by the federal government.” The present government has discovered 105.18 mmcfd of gas and 5,358 barrels per day of oil in Sindh and Khyber-Pakhtunkhwa.
It is also working on a proposal to install LPG-air mix plants in Azad Jammu and Kashmir, Gilgit-Baltistan, Balochistan and other areas of the country.
Published in The Express Tribune, December 7th, 2018.