Prompt payments: Finance ministry to release money for LNG imports
Will directly credit amount to PSO accounts from power subsidy.
At current prices, each LNG shipment will cost $30 million, which will be provided directly by the finance ministry to PSO, the importing company, which will then clear the bill of Qatargas. PHOTO: REUTERS
ISLAMABAD:
As the country finalises a liquefied natural gas (LNG) import deal with Qatar, the government has decided to empower the Ministry of Finance to deposit money into the accounts of Pakistan State Oil (PSO) in a bid to clear the way for smooth payments for gas purchases.
A decision to this effect was taken in a meeting of the Cabinet Committee on Energy on March 3, which was chaired by Prime Minister Nawaz Sharif, said officials familiar with the development.
The government is endeavouring to fast-track import of LNG in an attempt to ease gas shortages in the country, but the import is linked with prompt payments within three days, officials said citing the discussion in the meeting.
However, payments through normal government channels would require more than a week.
Meeting participants told the committee that an amendment had been made in Section 5(b) of the Controller General of Accounts (Appointment, Functions and Powers) Ordinance 2001 (xxvi of 2001) through Finance Act 2014, which says, “in case of exigency, the Ministry of Finance or finance departments, as the case may be, may authorise payments directly from the State Bank of Pakistan and submit such information to the controller general to enable him to record the transactions.”
In case of exigency, the Ministry of Water and Power may authorise the Finance Division to make payment for LNG imports from the subsidy account directly through the SBP, they said.
The advice for direct payment along with a copy of the sanction letter, issued by the Finance Division, would be sent to the SBP on the same day.
The original sanction letter along with a copy of the advice would be forwarded to the Accountant General Pakistan Revenues (AGPR) for recording expenditures and the Ministry of Water and Power would also be informed.
It was proposed that the arrangement may be approved by the Cabinet Committee on Energy.
The committee decided that on the request of the Ministry of Water and Power, the payment of subsidy relating to LNG imports by PSO would be made directly through the SBP into the PSO accounts.
Given the precarious finances of energy companies, particularly power plants, the government is trying to establish a mechanism that will ensure a smooth flow of payments to the LNG suppliers.
At current prices, each LNG shipment will cost $30 million, which will be provided directly by the finance ministry to PSO, the importing company, which will then clear the bill of Qatargas. The amount the ministry releases will be reduced from the subsidy it owes to the independent power producers (IPPs).
IPPs will be required to provide PSO standby letters of credit of $20 million to $60 million and an operative letter of credit for one month of gas supply of $10 million to $30 million.
Earlier, the energy committee was told that Pakistan had managed to clinch a $21-billion long-term contract with Qatar for LNG purchase at a highly attractive price. The imported gas is expected to help ease chronic shortage of natural gas in the country.
Under the terms of the agreement, Qatar will supply Pakistan 200 million cubic feet of LNG per day (mmcfd) under a pricing formula that translates into $7 per million British thermal units (mmbtu) for immediate supplies.
The price is lower than that being borne by the Indian importers, who are currently paying close to $9-10 per mmbtu.
Published in The Express Tribune, March 14th, 2015.
As the country finalises a liquefied natural gas (LNG) import deal with Qatar, the government has decided to empower the Ministry of Finance to deposit money into the accounts of Pakistan State Oil (PSO) in a bid to clear the way for smooth payments for gas purchases.
A decision to this effect was taken in a meeting of the Cabinet Committee on Energy on March 3, which was chaired by Prime Minister Nawaz Sharif, said officials familiar with the development.
The government is endeavouring to fast-track import of LNG in an attempt to ease gas shortages in the country, but the import is linked with prompt payments within three days, officials said citing the discussion in the meeting.
However, payments through normal government channels would require more than a week.
Meeting participants told the committee that an amendment had been made in Section 5(b) of the Controller General of Accounts (Appointment, Functions and Powers) Ordinance 2001 (xxvi of 2001) through Finance Act 2014, which says, “in case of exigency, the Ministry of Finance or finance departments, as the case may be, may authorise payments directly from the State Bank of Pakistan and submit such information to the controller general to enable him to record the transactions.”
In case of exigency, the Ministry of Water and Power may authorise the Finance Division to make payment for LNG imports from the subsidy account directly through the SBP, they said.
The advice for direct payment along with a copy of the sanction letter, issued by the Finance Division, would be sent to the SBP on the same day.
The original sanction letter along with a copy of the advice would be forwarded to the Accountant General Pakistan Revenues (AGPR) for recording expenditures and the Ministry of Water and Power would also be informed.
It was proposed that the arrangement may be approved by the Cabinet Committee on Energy.
The committee decided that on the request of the Ministry of Water and Power, the payment of subsidy relating to LNG imports by PSO would be made directly through the SBP into the PSO accounts.
Given the precarious finances of energy companies, particularly power plants, the government is trying to establish a mechanism that will ensure a smooth flow of payments to the LNG suppliers.
At current prices, each LNG shipment will cost $30 million, which will be provided directly by the finance ministry to PSO, the importing company, which will then clear the bill of Qatargas. The amount the ministry releases will be reduced from the subsidy it owes to the independent power producers (IPPs).
IPPs will be required to provide PSO standby letters of credit of $20 million to $60 million and an operative letter of credit for one month of gas supply of $10 million to $30 million.
Earlier, the energy committee was told that Pakistan had managed to clinch a $21-billion long-term contract with Qatar for LNG purchase at a highly attractive price. The imported gas is expected to help ease chronic shortage of natural gas in the country.
Under the terms of the agreement, Qatar will supply Pakistan 200 million cubic feet of LNG per day (mmcfd) under a pricing formula that translates into $7 per million British thermal units (mmbtu) for immediate supplies.
The price is lower than that being borne by the Indian importers, who are currently paying close to $9-10 per mmbtu.
Published in The Express Tribune, March 14th, 2015.