PML-N govt diverts IP pipeline funds to cover fiscal deficit

Published: July 3, 2013
SHARES
Email
Seeks to amend GIDC Act to allow it to manipulate gas prices at will. ILLUSTRATION: JAMAL KHURSHID

Seeks to amend GIDC Act to allow it to manipulate gas prices at will. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: 

The PML-N government has seemingly put the Iran-Pakistan (IP) gas pipeline project on the backburner by deciding to use the funds generated through the imposition of the Gas Infrastructure Development Cess (GIDC) to bridge the fiscal deficit.

The previous government had imposed the GIDC on gas consumers to generate the $1 billion needed to finance the construction of the IP gas pipeline, but the PML-N government is seeking discretionary powers from Parliament to raise gas prices through the cess, in order to bring them at par with prices of other alternate fuels.

Officials said the move may result in a massive rise in gas prices for all consumers except domestic consumers – including the CNG and fertiliser sectors and captive power plants – if the government decides to rationalise gas prices and bring them at par with other alternate fuels like petrol and furnace oil.

Sources said the petroleum ministry had approached the Council of Common Interests (CCI) to seek consent from the provinces to allow the federal government to introduce a new bill in parliament which will amend the GIDC Act, 2011. The amendments will allow the centre to use the GIDC as a fiscal tool in rationalising gas prices.

The PML-N government is seeking ex post facto approval for the GIDC Act, 2011 as a money bill. The move will provide legal cover to the previous government’s decision to impose the cess, while allowing the new government to keep the money recovered from gas consumers since the cess was imposed on January 1, 2012. Sources say that the collection so far amounts to Rs40 billion.

A court had earlier declared the GIDC illegal and ordered the government to pay back all money recovered from consumers under this head. The Islamabad High Court had declared the GIDC Act, 2011 as ultra vires to the constitution, mainly because it had been promulgated without due approval from the CCI. However, the new government will work its way around that complication and keep charging the cess from consumers by legalising the GIDC and securing an ex post facto approval from the CCI.

The Oil and Gas Regulatory Authority currently is the only authority that can fix gas prices, and the federal government is obliged to follow its decisions in this regard.

The government also plans to take the provinces onboard, seeking an ex post facto approval from them to amend the second schedule of the GIDC Act, as was done through the Finance Act, 2012, in order to provide flexibility to the federal government to revise the rates of the cess subject to a maximum limit.

Published in The Express Tribune, July 3rd, 2013.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (22)

  • Muhammad
    Jul 3, 2013 - 12:47AM

    This will ruin relations with Iran :/

    Recommend

  • shahid
    Jul 3, 2013 - 12:59AM

    why does not the govenment ask Iranians for loan/ financial assistance to complete the project???

    Recommend

  • naeem khan Manhattan,Ks
    Jul 3, 2013 - 1:08AM

    So finally NS succumbed to the US pressure, the previous government waited till the end of their tenure but at least they did and now NS is scuttling it. When would this elite class of Pakistan ever think of the nation and national interests instead of their interests and that is to protect their ill gotten money stashed in foreign countries. It is beyond any ones logic why not import this reliable gas from neighbor Iran than getting it from far away places. Imran Khan and the rest of opposition should never allow this government to draw back this very crucial project between Iran and Pakistan. Americans are punishing Iran because Iran has opted to have her own independent foreign policy where as Pakistan has become a client and vessel State for foreign countries. When would you people ever stand up on your own and take a pride that it is a sovereign country. Pathetic leadership and pathetic people.

    Recommend

  • Waseem
    Jul 3, 2013 - 2:20AM

    Its a serious crime against Pakistan. A serious mistake by pml.n.

    Recommend

  • Go zardari go
    Jul 3, 2013 - 2:36AM

    Alhumdullilah!! lets leave unfinished projects unfinished.

    Recommend

  • Ricky
    Jul 3, 2013 - 2:38AM

    The rightwing leaders were supported and protected by TTP. Now it is payback time. Stopping the Iran pipleline would make Whabi/Salifi forces happy as well as the US. This elected govt is going to do what it is elected for.

    Recommend

  • jibran
    Jul 3, 2013 - 2:45AM

    PMLN will do anything to please its Saudi masters. Even at the cost of selling the country or completely ruining it.

    Recommend

  • sehr.siddiqui
    Jul 3, 2013 - 3:09AM

    That is the American Influence through Saudia Arabia. You should rather be more friendly with your neighbor. This is rather a huge technical blunder. Recommend

  • Jul 3, 2013 - 3:36AM

    @shahid:
    Iran has already agreed to provide a loan of $250 million and a further $250 million subject to negotiations. The total cost of the project is $1350 million so Iran is financing 37% of the project! Iran has also completed constructing the pipeline on its territory up to the border with Pakistan. Pakistan on the other hand has not spent a single cent or constructed anything yet. So how can you ask for more from Iran?

    The truth is that Pakistan is not serious about this pipeline. It has wasted the Iranians money and time. There will be grave repercussions of this in the future.

    Recommend

  • Khalid
    Jul 3, 2013 - 3:46AM

    Prices of natural gas in this region:

    Qatari LNG: 18 dollars per MMBTU
    TAPI gas: 14 dollars per MMBTU plus Pakistan paying royalty fee to Afghanistan
    EU importing gas from Russia: 13 dollars per MMBTU
    IP gas: 11 dollar per MMBTU
    Subsidized natural gas in domestic US market: 3.5 dollars per MMBTU
    Subsidized natural gas indomestic Pakistani market: 3 dollars per MMBTU

    India got 65 American nuclear power reactors each with 1200 MW (total: 78,000 MW) for pulling out of IPI, plus preferential trade deals with US and EU including huge foreign investment, jobs for Indians and transfer of technology to India.

    Pakistan got zilch. The load shedding is getting worse. Just like the previous government, this new regime is also just talking big. People should get prepared as the load shedding and the gas shortage is going to get even worse by June 2018 when PMLN will collect all the loot and retires for some years. This is the fate of Pakistan. Led by corrupt and coward leaders of all stripes. Whether civilian or otherwise.

    Recommend

  • neil
    Jul 3, 2013 - 4:10AM

    Not surprised – beggars can’t be choosers – pakistan is begging the IMF for $$$ and inspite of the finance ministers bluster lol ..we all know when you want something you have to give something in return….so congrats the IMF loan will be sanctioned soon cheers ….;)

    Recommend

  • Haider ali khan
    Jul 3, 2013 - 4:15AM

    Mr Nawaz Shareef one used no one knows money collected from Mulk Sanwaro scheme, then he coveted prvate parties foreign deposits in rupees and as said the night before the announcement all the PMLN high ups withdrew dollars from banks. Now they want to hammer the Pak Iran Gas pipe line without caring if the project is not completed by 2014 Pakistan will have to pay penalty amounting to millions of dollars per month. Mr. NS is interested in yellow cabs and road building. Please ask some one to request him to change his financial attitude. First was Mr Sir Taj Azeez and now Dar.Please use your economic sense

    Recommend

  • gp65
    Jul 3, 2013 - 4:25AM

    @shahid: “why does not the govenment ask Iranians for loan/ financial assistance to complete the project???”

    Iran has given $500 suppliers credit (which is a form of loan) if Pakistan uses Tadbir Energy as a contractor. So Pakistan does have to come up with the balance one billion anyway. In addition, Pakistan never signed the contract with Tadbir under Zardari as well as the interim government thus alienating Iran. http://tribune.com.pk/story/561464/iran-upset-about-slow-progress-on-gas-pipeline/

    In any case if there is no money to build the pipeline, how will you find the money to pay for the gas once the pipeline is built plus return the loan? Recommend

  • m omar
    Jul 3, 2013 - 5:19AM

    This means farewell to Gawadar projects as well as IP project was also intended to supply Gawadar port where Chinese are involved. It is right to say PML-N is pro-Saudi-American mind set.

    Recommend

  • Maialu
    Jul 3, 2013 - 5:38AM

    This is the reason results were changed overnight to give PMLN VICTORY and now masters wll be paid in decisions to ruin Pakistan

    Recommend

  • Xnain
    Jul 3, 2013 - 6:55AM

    Whats more Ironic is that depite having a significant information available,some of the comments reflect complete ignorance from basic facts
    1-The price of Gas through IP pipeline is higher than TAPI. Now this shows that Iran will sell us expensive gas.
    2- The payment mechanism is still not possible since Iran cannot trade in international currencies. This is the exact reason why both Pakistani and Chinese banks refused to finance IP pipeline. The only permissible way is to have settle trades through barter system. However, with expected 300 Million USD worth of annual value, I haven’t seen anybody discussing how this trade will settle? or can Pakistan and Iran have barter system in place big enough to compensate this huge amount.

    Recommend

  • Khalid
    Jul 3, 2013 - 8:57AM

    @ Xnain,

    The only one who is ignorant is you. TAPI as per Pakistan government documents is more expensive than IP. Further on top of it, Pakistan has to pay royalty fees to Afghanistan a country perpetually at war with itself for the past 1000 years. Pakistan would do well if it does barter. Wheat and rice for gas. This is the best deal for Pakistan. Who cares for dollars and IMF and World Bank loans. Just do away with them.

    But as reported by Tribune, the reason for cancelling IP has been revealed already. Nawaz Sharif is going for importation of LNG from Qatar. At the cost of more than 20 dollars per MMBTU. I am sure you have no problem with that. Your only problem in IP which provides gas at 11 dollars per MMBTU is because it is the cheapest option available and there is no commission involved: http://tribune.com.pk/story/571530/lng-import-pakistan-to-resume-stalled-talks-with-qatar/

    Recommend

  • Iram
    Jul 3, 2013 - 9:36AM

    NS is pleasing his masters, USA and KSA.

    Recommend

  • Ali Asghar
    Jul 3, 2013 - 10:28AM

    This rule will end very soon.

    Recommend

  • Hu
    Jul 3, 2013 - 7:21PM

    to take the GIDC from the consumers might be unlawful as declared by the courts….. but taking the money for one reason and using it for something else is an atrocity.
    No IP and No LNG import. Is that our fate???
    Please build on work done by previous governement rather than counter it and then end up doing the same thing yourselves. Especially in the energy sector.

    Recommend

  • faisal
    Jul 3, 2013 - 8:37PM

    if they are dumping this project then its a good decision. this pipeline was not economically good for Pakistan as it will result in 3.5 times more expensive energy per unit and it will reward Iran for using sectarian pressure on Pakistan for the deal.Reality is after the Dharna pressures from pro-khomenist groups in Pakistan, not even PTI and JI had the courage to discuss the price issue and long term obligatory buying issue related to the pipeline.

    we not only need to come out of USA corporate imperialism but also we need to save ourselves from Iran’s sectarian imperialism in the region.

    Recommend

  • Mish
    Jul 3, 2013 - 11:25PM

    Saudi Arabia Zindabad!

    Recommend

More in Business

Karachi

Fiqah Hanfia
Sehar 4:14 AM
Iftar 7:26 PM
Fiqah Jafaria
Sehar 4:26 AM
Iftar 7:26 PM
Fiqah Hanfia
Sehar 4:14 AM
Iftar 7:26 PM
Fiqah Jafaria
Sehar 4:26 AM
Iftar 7:26 PM

Lahore

Islamabad