ECC fails to halt cheap gas supply

Agrees on need to have uniform gas prices for all fertiliser plants

ISLAMABAD:

A cabinet body on Wednesday could not agree on the discontinuation of subsidised gas supply to two fertiliser plants and extended it for another two weeks aimed at developing consensus among all stakeholders.

The Economic Coordination Committee (ECC) of the cabinet agreed, in principle, that there was a need for uniform gas prices for all fertiliser plants, a decision that would result in a massive increase in gas prices for some plants but would slash prices for others.

The ECC’s meeting was held in violation of laid-down procedures and rules that required the timely issuance of meeting agenda and summaries. ECC members came unprepared, underscoring the flawed economic and commercial decision-making.

The Ministry of Industries and the Ministry of Energy would now hold meetings with fertiliser manufacturers for building consensus, said Gohar Ejaz, Minister for Industries, after the meeting.

The energy ministry proposed to the ECC that Sui Northern Gas Pipelines Limited (SNGPL) may be allowed to continue the supply of gas to Fatima Fertiliser and Agritech plants at the re-gasified liquefied natural gas (RLNG) tariff notified by the Oil and Gas Regulatory Authority (Ogra) for domestic urea production from November 1, 2023 to March 31, 2024 on a full-cost recovery basis.

Had the ministry’s proposal been accepted, it would have increased gas prices by about 150% for the two plants, said Ejaz.

The industries minister said that all plants should be provided gas at one price so that no one could take undue advantage of the lower input cost and make extra profits.

The imported gas costs around Rs3,650 per million British thermal units (mmBtu) but these plants are getting gas supplies at around one-third of the cost.

The Ministry of National Food Security also supported the proposal of providing gas at uniform rates for all fertiliser plants.

For instance, Engro Fertilisers’ new plant has a claim for extended period for feed gas concessionary tariff of $0.7 per mmBtu.

Ironically, the ECC, in its meeting held on October 3, had “directed the Ministry of Energy to continue the supply of gas to all fertiliser plants to ensure sufficient supply of fertiliser in the market”.

A month ago, the ECC had made the decision about extending the supply of subsidised gas to two urea plants on the instructions of the apex committee of the Special Investment Facilitation Council (SIFC).

But this decision remained unimplemented for the past one month and the matter had to be brought before the ECC again.

SIFC, in its fifth meeting, had directed the Ministry of Industries to ensure the uninterrupted supply of gas to two fertiliser companies using the system gas of SNGPL till March 2024 for import substitution.

The industries ministry was of the view that the continuation of gas supply would help reduce the import of fertiliser by 300,000 tons. There will still be a shortfall of 200,000 tons for the Rabi sowing season, which is now being met through imports.

In its October meeting, the ECC had decided to constitute an inter-ministerial committee, which would come up with recommendations for the allocation and pricing of gas for the fertiliser industry. But discussions on the matter ended inconclusively on Wednesday.

It was discussed that until the decision on gas supply at actual prices was not made, the provinces should bear the subsidy cost. However, no provincial representative was present in the meeting.

The ECC also took up a summary for waiving all types of duties and taxes on the office equipment and furniture donated by China for the Gilgit-Baltistan (G-B) government.

The Immigration Department of China had donated the office equipment and furniture to the G-B Police in January last year. However, due to the Covid restrictions, the donated items could not be cleared by the Customs Port Sost, Hunza.

The Department of Home and Prisons, Civil Secretariat, Government of G-B has now requested for recommendations of the federal government for the grant of one-time exemption from duties and taxes. The FBR has supported the proposal, subject to endorsement by the federal cabinet.

Published in The Express Tribune, November 2^nd, 2023.

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