ISLAMABAD, March 28: The provinces have devised a new formula to share gas development surcharge (GDS) in which both the gas volume and its price would be given proportionate consideration under the sixth national finance commission (NFC) award, Dawn has learnt.
The NFC meeting in Quetta on Tuesday would, however, take up the subject once again and take Punjab and the NWFP on board, senior government officials said. "The two major GDS recipients - Sindh and Balochistan - have already settled the issue through a mutually devised basket of the GDS calculation," they said.
Under the new arrangement that would remain enforced for five years, about 22.5 per cent of the total GDS would go straight to Balochistan. Rest of the 77.5 per cent would be distributed among all the provinces including Balochistan on the basis of their contribution by volume and prevailing prices. Punjab is estimated to get six per cent of the total GDS under the scheme.
It has also been agreed by the four provinces that royalty on natural gas would continue to be transferred to them by the centre strictly under the relevant provisions of the Constitution while the GDS sharing would take place under the NFC.
Article 161 (1) of the Constitution provides for transfer of royalty on well-head price of natural gas to the province where the gas field is located, while the GDS is a part of the NFC under article 160 of the Constitution.
The federal government has no objection to the arrangement, but it would have to satisfy the NWFP which has no share in the GDS or gas royalty at present, but would qualify to get a share from both the heads owing to coming on stream of its two gas fields in a couple of years.
The total size of the royalty and the GDS at present is around Rs12.5 billion and Rs15 billion, respectively, and is transferred to the provinces after deduction of two per cent collection charges.
Earlier, the federal government had proposed to merge royalty and the GDS under one head and calculate it on the basis of heating value (in million British Thermal Units-MMBTU) at a fixed rate of Rs26 per MMBTU irrespective of its prescribed price, quantity or location of the gas field.
The centre had believed that merger of royalty and the GDS would encourage the provinces to produce more gas. It was of the view since the consumer prices were uniform throughout the country, all the provinces should get equal return through the GDS.
Currently, Punjab is getting royalty and the GDS at Rs34 per MMBTU, followed by Sindh at Rs28 per MMBTU and Balochistan at Rs21 per MMBTU. Since major chunk of more than 50 per cent of the natural gas was currently coming from Sindh, it gets a higher share from the GDS because of calculations being made on the basis of quantity, even though its contribution in the overall GDS is comparatively less owing to its higher well-head gas prices.
Balochistan, supplying about 38 per cent of current total gas, gets less share from the GDS although its contribution to the overall GDS is higher owing to its cheap well-head prices. The Punjab's share from GDS is insignificant because of a nominal gas production. The difference between consumer price and well- head price is defined as the GDS.
At present, royalty on natural gas and development surcharge is calculated under two separate heads and transferred to Punjab, Sindh and Balochistan. The NWFP would also get royalty and the GDS from the next year with the development of its newly discovered fields.
Under the existing set up, Balochistan gets around Rs1.34 billion royalty and Rs5.5 billion GDS. Similarly, Sindh receives Rs8.7 billion in GDS and Rs5.1 billion as royalty. Punjab's share of royalty and the GDS is estimated at Rs936 million and Rs1 billion, respectively.
Balochistan has been agitating that it was not getting its fair share on gas supplies only because of low well-head rates of Sui gas field, on which it had no control and was subjected to discrimination.
The GDS had become one of the major irritants for the National Finance Commission (NFC) and Balochistan had even threatened to seek arbitration in case amicable solution was not found.
It had demanded about 100 per cent increase in its GDS share.This could increase natural gas prices manifold throughout the country and out of the reach of the majority of the consumers.
