ECC meeting: Govt offers incentive, lowers taxes on LNG imports

Move meant to alleviate woes of CNG sector, facilitate public.

ISLAMABAD:

In a move to make imported Liquefied Natural Gas (LNG) cheaper for the private sector, the government on Wednesday significantly lowered taxes on imports that will alleviate woes of Punjab’s CNG sector besides saving thousands of jobs.

The Economic Coordination Committee (ECC) of the Cabinet exempted the imports of LNG from Gas Infrastructure Development Cess (GIDC) and cut the General Sales Tax (GST) rate from 17% to 5%, according to a handout issued by the Ministry of Finance.



The major beneficiary of the decision will be Compressed Natural Gas (CNG) filling stations of Punjab and Islamabad Capital Territory that remain closed most of the time due to non-availability of gas. There are over 2,500 CNG filling stations in Punjab, providing jobs to thousands of people.

“The decision is taken with a view to facilitate the general public and encourage investment in the sector,” said Finance Minister Ishaq Dar. He said the government cannot allow total exemption from general sales tax, as it wanted to promote tax culture in Pakistan. “If the business is thriving, there is no harm in contributing a small percentage to the exchequer,” he added.

The country is facing acute gas shortage and most of the industries remain shut in winters. It is expecting the first LNG flows in February and an LNG terminal is also under construction to handle the consignments.

The ECC directed the Ministry of Petroleum and Natural Resources and Oil and Gas Regulatory Authority (Ogra) to mutually work out the Gas Pipeline Infrastructure Development Plan in the wake of LNG imports and anticipated indigenous supplies.

The ECC also allowed the Port Qasim Authority (PQA) to buy or lease four LNG-compatible tug boats from its own resources while also giving permission for their commercial usage on cost-recovery basis. Dar, also the ECC chairman, directed that the boats be made available before January 7, 2015 as LNG shipments would be due by that point in time.



The ECC also approved a proposal moved by the Cabinet Division for amendment in the Oil and Gas Regulatory Authority Ordinance of 2002, aimed at monitoring and establishing prices of all refined oil products in the country.

After ECC’s clearance, the proposed draft bill tabled in the Council of Common Interests – the highest constitutional body dealing in inter-provincial matters.

The amendments are proposed to be made in the rules guiding oil sector regulations which include monitoring the price of petroleum products in the market, definition of petroleum products, including CNG. The amendments will also determine the powers and functions of the authority as well as the role of the federal government in determining the well-head gas prices, including imported gases in the pricing of natural gas.

The amendments will also give authority to Ogra to determine gas prices without public hearing under certain specified conditions, a move that is contrary to the spirit of transparency and will allow the regulator to quietly pass on various charges to consumers.

The amendments also deal with imposition of fines and penalties, while determining and notifying the maximum sale price of CNG to be charged by a licensee from a consumer for vehicular use.

The ECC allowed the packages limited for equity investment of $15 million abroad through a special purpose vehicle in Mauritius with initial remittance of $100,000.

The committee also gave consent to import of 570,000 tons of fertiliser for the Rabi season. The foreign exchange required for the import of the stock will be approximately around $123.9 million and would involve Rs4.2 billion of subsidies, according to the finance ministry.

A quantity of 185,000 tons of urea fertiliser will be imported from a Saudi manufacturer and the balance quantity of 385,000 tons will be imported from open international market.

Published in The Express Tribune, October 30^th, 2014.

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