Gas prices for the fertiliser industry, Compressed Natural Gas (CNG) and the power sector are expected to go up by three to 193% after the imposition of the Infrastructure Development Cess (IDC). The levy is being implemented to generate an expected Rs34 billion per annum to finance the infrastructure costs for gas import projects like the Iran-Pakistan (IP) gas pipeline project.
The National Assembly on Friday last passed the “Gas Infrastructure Development Cess Bill 2011” aimed at building infrastructure to import gas to fill the supply and demand gap in the country.
This increase will be in addition to the recent 11-14 per cent hike approved by the Oil and Gas Regulatory Authority (Ogra) for gas utilities - Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline Limited (SNGPL) - effective from January 1, 2012.
The highest rise in gas prices – of 193.13% - will be seen in the fertiliser sector. The increase for most industrial consumers will be 2.9 per cent. The power sector will face an increase 6.03 per cent. The increase for Independent Power Producers (IPPs) will come to 18.54 per cent.
However, domestic and commercial gas consumers will be exempted from the imposition of Infrastructure Development Cess.
Dean of Business Studies at Pakistan Institute of Development Economics (PIDE) Dr Zafar Mueen Nasir said that as the gas was being wasted in different sectors because of being cheaper source of fuel and the imposition of cess would help to avoid its wastage.
“No doubt, enhanced cost of gas will affect businesses but consumers would use it in a careful way due to its higher cost because of being costlier fuel and so more gas would be diverted to different sectors of economy and that is a positive impact,” he added.
Former Managing Director SSGC Munawar Baseer said that government should have allocated funds out of Public Sector Development Programme (PSDP) to finance IP and TAPI gas pipeline projects that are still far from becoming a reality. He said that this levy would be a burden on consumers. “Government is already collecting Petroleum Development Levy (PDL) on petroleum products which should be used for gas import projects,” Baseer said.
Under IDC imposition plan, government will charge Rs197 per million cubic meter gas per day (mmcfd) IDC on gas to be used as feed stock for fertiliser sector, Rs79 to Rs141 per mmbtu on CNG, Rs13 per mmbtu for industry, Rs27 per mmbtu for the power sector and Rs70 per mmbtu for Independent Power Plants (IPPs). In the CNG sector, the government will impose Rs141 per mmbtu for consumers falling in Region-1 and Rs79 per mmbtu for consumers in Region-2.
After imposition of cess, the price of gas for feed stock for fertilizer sector would jump up to Rs299 per mmbtu from existing Rs102 per mmbtu, CNG from Rs 571.88 per mmbtu to Rs712.88 per mmbtu in Region -1 and Rs650.88 per mmbtu in Region-2, price for industrial consumers from Rs434.18 per mmbtu to Rs447.18 per mmbtu, power sector gas price will go from Rs447.14 per mmbtu to Rs474.14 per mmbtu and for IPPs the increase will push prices from Rs377.39 per mmbtu to Rs447.39 per mmbtu.
Published in The Express Tribune, November 30th, 2011.
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