ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Thursday decided to charge consumers of the two gas utilities Rs101 billion to partly finance pipeline network.

At a charged meeting presided over by Finance Minister Ishaq Dar, the committee also approved Rs3 per unit reduction in future power tariff for industrial consumers previously announced by the prime minister in December.

It also regularised import of first six cargoes of the liquefied natural gas (LNG) in April-May last year through a floating storage terminal, but deferred a final decision on LNG sales and purchase agreement between Qatargas and Pakistan State Oil (PSO) until Friday.

“It was a bad day for member gas (Oil and Gas Regulatory Authority, or Ogra) Amir Naseem,” said a cabinet member who attended the meeting, adding that the finance minister lost his temper at the beginning of the meeting over Ogra’s written comments against petroleum ministry’s summary on Rs101bn financing arrangement for gas companies.

Ogra earlier opposed the recovery of Rs101bn from consumers through tariff, saying the pipeline projects should be financed out of Gas Infrastructure Development Cess (GIDC) already being collected from consumers.

The regulator believed that it could not allow under the GIDC law the “double taxation” through gas tariff. Consumers, who were already paying GIDC for pipeline infrastructure, could not be burdened again with financing for repayment of Rs101bn loan along with 17 per cent return on assets to be created by the gas companies through these loans.

This was enough to ignite Mr Dar’s ire. “Where should we bring this money from? Why don’t you charge them (consumers),” said the finance minister after reading Ogra’s written opinion. “It’s government prerogative to decide from where to raise money and where to spend,” he was quoted as saying.

He then asked the Ogra member to come close to him and show where in the GIDC law it was written the money would be spent on LNG pipelines and consumers could not be charged for it.

Mr Naseem had to leave his seat to move to the ECC chairman and read with him various relevant clauses to prove his point. The finance minister, still dissatisfied, then remarked: “You people also live in Pakistan and should also understand how we should move on. Don’t do this.”

The Ogra member told the ECC that the regulator could not allow double charges for the same purpose under the law but if the government issued policy guidelines it would have to implement them.

The finance minister then decided to issue policy guidelines. He believed that the projects like pipelines under Turkmenistan, Afghanistan, Pakistan and India (TAPI), Iran-Pakistan and Karachi to Lahore and Gwadar to Nawabshah for transportation of LNG and natural gas required Rs600bn and the government had so far collected around Rs200bn only.

Under the federal budget, the government is to collect Rs145bn through GIDC on gas sales during the current fiscal year. The government had given undertakings to parliament and the courts that the tax (GIDC) would be used to construct gas pipeline network.

The GIDC is being collected from various consumer categories — except residential consumers — for more than five years now with the sole objective of arranging funds for gas pipeline infrastructure to facilitate utilisation of imported gases from LNG and proposed pipelines from Turkmenistan and Iran.

The petroleum ministry demanded collection of Rs101bn from consumers so that the gas companies could construct pipelines to transmit imported LNG from ports to power load centres in Punjab. The petroleum ministry has also requested the ECC to allow the two gas companies to claim return on investment planned to be made on pipelines with this additional expenditure.

The ministry said the ECC approved in September 2015 the bank borrowing of Rs101bn from commercial banks to SNGPL and SSCGL to carry out augmentation of pipelines for phase two of the upcoming LNG and anticipated indigenous supplies against the government’s guarantees to be provided by the Ministry of Finance but was being disallowed in tariff by Ogra.

The petroleum ministry reported that financial arrangements were prerequisite to complete RLNG project of national importance, in the absence of which the companies could not be able to proceed further, delaying the project implementation.

The ECC directed a committee comprising secretaries of finance, law and petroleum to submit a revised summary on Friday for the clearance of $15bn LNG supply agreement between Qatargas and PSO for 15 years. Barrister Zafarullah Khan, prime minister’s special assistant on human rights, was also asked to help the committee address legal challenges, including change in Ogra rules, higher port charges build-up in tariff, etc.

To implement an announcement made by the prime minister last month, the ECC also decided to issue policy guidelines to National Electric Power Regulatory Authority (Nepra) for a Rs3 per unit cut in existing power tariff for the Industrial consumers of all distributions companies (Discos) for 2015-16, for units consumed from Jan 1, 2016 onwards.

The ECC on a proposal submitted by the Ministry of Petroleum and Natural Resources gave ex-post facto approval in respect of six cargoes arranged by PSO from Qatargas under a government-to-government arrangement on a FOB (free on board) basis using FSRU (floating storage and regasification unit) as LNG carrier.

Meanwhile, APP reported that the chair gave instructions to reconvene ECC meeting on Friday (today) to consider important

leftover agenda items including provision of salaries to the Pakistan Steel Mills and supply of wheat to the displaced people through the World Food Prog­ramme.

Published in Dawn, January 29th, 2016