THE DAILY TIME............. Friday, November 04, 2011
ISLAMABAD: Senate Standing Committee on Finance here on Thursday with majority members authorizing the federal government to impose and collect Rs 38.390 billion from gas consumers for development of gas infrastructure including Iran-Pakistan (IP) Pipeline and Turkmanistan-Afghanistan-Pakistan and India (TAPI) Gas Pipeline Project and storage facilities for imported Liquefied Natural Gas (LNG).
In this regard, the Senate body approved two money bills namely “The Petroleum Products (Petroleum Levy) Amendment Bill 2011” and “The Gas Infrastructure Development Cess Bill 2011” with few key recommendations for blocking sweeping powers to government on fixation of gas cess rates.
Senator Ahmed Ali from MQM, Senator Ishaq Dar from PML (N), Senator Haroon Khan from PML (Q), Senator Ilyas Bilour from ANP, Senator Islam-ud-Din Sheikh, Senator Sughra Imam from PPP supported the proposed legislations.
Senator Safdar Abbasi from the ruling party PPP while opposing the proposed bills filed his dissenting note against the passage of these bills, as well as Senator Waqar Ahmad Khan abstained from participating in the proceeding of the meeting by declaring his interest in LPG business.
Senate body on finance met in the parliament house with Senator Ahmed Ali in the chair and considered the validity of the proposed money bills and after consulting provisions of the constitution and meaning of taxation, the committee was agreed to consider these bills as money bills.
During the presentation on the proposed bills, Federal Minister for Petroleum Dr Asim Husain, Secretary Finance Dr Waqar Masood Khan and Secretary Petroleum Ijaz Chaudhry explained the committee on the net impact of the these legislation and informed that there would be a burden on Rs 38.390 billion on gas consumers within this fiscal year, government to generate Rs 34.390 billion through imposition of Gas Development Cess and Rs 4 billion through imposition of Petroleum Levy on locally produced Liquefied Petroleum Gas.
Domestic consumers of natural gas has been exempted from Gas Development Surcharge, however, fertilizer sector to be required to collect Rs 11.10 billion, CNG stations of the country Rs 11.88 billion, industrial sector Rs 4.62 billion, MGCL Rs 430 million, PPL Rs 460 million and IPPs Rs 5.88 billion from their consumers. Petroleum levy of local production of LPG to put Rs 4 billion burden on local producers.
Federal Minister for Petroleum Dr Asim Husain explained to the committee that there are many ways to finance infrastructure development projects of gas sector and one option is to beg to the donor community and no body is ready to give us this. Borrow from donors would also put burden on all consumer categories or arrange financing within the country to promote national cause. The present government has opted to generate the required financing of $1.250 billion for Iran Pakistan Gas Pipe Line project and $7.6 billion for Turkmanistan-Afghanistan-Pakistan and India (TAPI) Gas Pipeline Project during next few years.
LNG import would be starting from October next year and there would be dire need to establish required infrastructure it’s storage within the country and this would also require arranging financing.
Petroleum levy on locally produced LPG would help government blocking the windfall gains to local producers of LPG and Gas Cess to be charged from consumers who would be able to bear it’s burden.
The Minister was of the view that local producers of LPG, including public sector producers, have created a monopoly on LPG business and they distort the LPG market. When any body try’s to import LPG they drop the local LPG prices to keep the new player out of the market and when no body is importing they increase the price of LPG and make windfall gains by selling it at their own price. The levy of Petroleum levy of locally produced LPG would help generate revenues for the government and blocking the way of local producers from making windfall gains and manipulation.
The Minister assured the committee that Gas Cess on CNG stations should not to increase the price of CNG, as there is a discount of 15 percent that is being given to the consumers by the CNG stations that would be eliminated.
The committee was of the view that government should agree on fixing the rates of Gas Cess, however, Petroleum Minister and Secretary Finance were of the view that the prices of gas fluctuate even within weeks and each consignment and fixing rate of Gas Cess in the proposed legislation would bound the government to again and again approach the parliament for revision in its rates from different consumer categories.
Petroleum Minister was of the view that government would also be required to provide subsidy on gas to be imported from Iran and Turkmanistan, as the price of imported gas would be much higher than local price.
Secretary Finance informed the committee that imported LNG to cost $16-18 to a unit against the present price of $1.2 being charged from fertilizer sector and Gas Cess would also be used for price equalization of imported alternate energy products through giving subsidy. Finance Secretary also hinted that government would gradually eliminate subsidy on gas for fertilizer sector and bring its tariff to an international level. He informed that any revision in Petroleum Levy on LPG and Gas Cess rates would be approved by the Economic Coordination Committee of the Cabinet and Federal Cabinet to endorse the revision in future.
Committee, however, in its recommendations (non-binding on government) proposed Gas Cess would be used only for gas infrastructure development and equalization of prices of imported alternate fuels. There would be no open-ended power to government to increase the rate of Gas Cess or Petroleum levy for the consumers and Schedule-II to be added in proposed legislation. In case any company fails to recover from it’s consumers Gas Cess, the company would be required to pay KIBOR+4 percent interest rate on the arrears amount.