The eleventh hour: ECC to make several important decisions before government bows out

Gas prices likely to rise after cess is reimposed; diesel may become pricier; older CNG stations can be shut down.

ISLAMABAD:

Gas prices may be increased before the general elections, as the government has decided to impose the Gas Infrastructure Development Cess (GIDC) on domestic and commercial consumers and has decided to raise the rates applicable on some categories of consumers in order to generate $1 billion for the Iran-Pakistan (IP) gas pipeline project.

A proposal in this regard will be tabled before the Economic Coordination Committee (ECC) of the cabinet for approval on Friday, just a few days ahead of the completion of the five-year tenure of the incumbent government.

Pakistan has made a commitment to Iran that it will generate $1 billion in financing for the IP gas pipeline project, whereas Iran will provide the remaining $500 million. The move is being made before the groundbreaking ceremony of the IP gas pipeline project, scheduled on March 11 on the Pakistan-Iran border.

Domestic and commercial consumers, cement manufacturers and the Liberty Power Plant are currently exempt from the GIDC: but, according to the revised schedule of GIDC rates to be tabled before the ECC on Friday (today), commercial and domestic consumers will pay Rs100 per million British thermal units (mmbtu) consumed.

It has been proposed to the ECC that the rate of cess on fertiliser manufacturers should also be increased from the existing Rs197 to Rs300 per unit, and for CNG consumers from Rs263.56 to Rs300 per unit in Region-1 (which includes areas of Khyber-Pakhtunkhwa, Balochistan and the Potohar region, including Rawalpindi and Islamabad). CNG consumers in Region-2 (comprising Sindh and Punjab) will not face a hike in the rate of cess.

The rate of cess for industry, captive power plants and fertiliser fuel stock will also go up from Rs50 to Rs100 per unit consumed. However, no increase in the cess rate for the Water and Power Development Authority, the Karachi Electric Supply Company and independent power producers has been proposed.

High-speed diesel may also become costlier by Rs2 per litre if the ECC approves raising the deemed duty on the fuel to 9% from the current 7.5%, in order for refineries to generate $2.5 billion from consumers for the upgradation of plants to produce diesel compliant with Euro-2 standards.

However, the ECC has been informed that the cost of diesel will rise only by Rs1.12 per litre if the duty is raised. “The price of diesel will actually go up by Rs2 per litre because the rise in deemed duty has been calculated at existing prices [which are subject to change],” sources have pointed out.

The ECC has also been approached to accord approval to an amount of Rs558 million to be released for new gas development schemes on the Sui Northern Gas Pipelines Limited (SNGPL) network for financial year 2012-13. Despite a severe gas shortage in the country, these politically-motivated schemes have been forwarded by the prime minister ahead of the elections.

It has also been proposed that the ECC consider unbundling SNGPL and the Sui Southern Gas Company, form a number of regional distribution companies, and introduce a new tariff regime for gas consumers following the imports of gas. Although no privatisation of distribution work has been proposed as such, sources are of the view that the government is considering the move due to high line losses and persistent gas theft.

The ECC is also to decide on whether to close those CNG stations which have completed fifteen years of operations. Sources say that CNG stations are supposed to apply for a five-year extension in marketing licences after completing fifteen years of operations, but it has been proposed to the economic body that these licences not be extended in a bid to overcome the gas crisis.

Published in The Express Tribune, March 8^th, 2013.

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