ISLAMABAD, April 17: Sindh and Balochistan have developed serious differences over sharing of the Gas Development Surcharge (GDS) they had settled a couple of weeks ago as the latter accused the former of backtracking from its commitment.

Balochistan Finance Minister Syed Ehsan Shah told a group of reporters that if the commitment was not honoured by Sindh, his province had the right to demand for a full Rs15 billion GDS since Balochistan was 100 per cent generator of the surcharge.

He said an understanding was reached between the two provinces and Balochistan expected its announcement on Friday but this had not happened.

When contacted, Sindh Finance Minister Syed Sardar Ahmad said he had indicated to guarantee up to a certain limit but would have to consult with the chief minister and his cabinet beyond that limit.

Background interviews with officials suggest Sindh had earlier agreed that about 22.5 per cent of the total GDS would go straight to Balochistan. The rest - 77.5 per cent - was to be distributed among all the provinces, including Balochistan on the basis of their contribution by volume and prevailing prices. This ensured about 51 per cent of the total Rs15 billion to Balochistan.

Punjab was estimated to get six per cent of the total GDS under the scheme. The rest of 43 per cent was to go to Sindh.

Balochistan is of the view that Sindh's contribution to the GDS is zero because average producer price of gas fields in Sindh is higher than overall consumer price.

It says that since 100 per cent of the GDS is generated by Balochistan because of its very cheap gas producer prices it has the right to demand it in full. The difference between producer price and consumer price is defined as the GDS.

It has, however, 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 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.

Balochistan, which is supplying about 38 per cent of the 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.

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 insisting that it is not getting fair share on gas supplies only because of low well-head rates of Sui gas field on which it has no control and is subjected to discrimination.

The GDS has become one of the major irritants for the National Finance Commission and Balochistan has even threatened to seek arbitration in case amicable solution is not found.