KARACHI, May 1: The Sui Southern Gas Company has urged the government to retain the subsidy for gas consumers despite the fact that international financial institutions insist that the subsidy be abolished.

Well-placed sources told Dawn on Saturday that the dismantling of the subsidy would not only adversely affect the so-called lifeline consumers, whose energy consumption is not more than the lowest slab of the SSGC tariff, but might actually lead to pilferage.

"The SSGC has to spend Rs140 or thereabouts to deliver gas to consumers who use at least 1,000 cubic feet of natural gas. But the consumers pay only Rs69 for 1,000 cubic feet of natural gas. The consumers belonging to the second slab pay Rs104 for the same amount of gas," they said.

The sources said that the SSGC had suggested to the government that the subsidy should not be available to consumers belonging to the third slab and onwards.

They added that the availability of subsidy to consumers of higher slabs caused wastage of natural gas.

"The amount of money obtained from domestic consumers constitutes 14 per cent of the total SSGC revenues. Similarly, sale of gas to domestic consumers is only 20 per cent of the total SSGC sales. Therefore, the SSGC has made out a strong case for retaining the subsidy for lifeline consumers," they explained.

The sector-wise break-up of the SSGC gas sales from July 2003 to Dec 2003 is: domestic 16 per cent, commercial two per cent, power 43 per cent, fertilizer eight per cent, Pakistan Steel five per cent and general industry 26 per cent.

The sources said that the government had decided, in principle, to dismantle the subsidy enjoyed by the fertilizer sector.

"Traditionally, the agriculture sector has remained most cosseted in Pakistan. The economic planners of the country have accordingly protected the fertilizer industry by offering it a substantial subsidy," they recalled.

They made it clear that the fertilizer industry enjoyed no subsidy on natural gas used to generate electricity.

The sources said the fertilizer industry in Pakistan had been doing very well for a very long time. They added that it did not stand to reason that the good efficiency of the fertilizer industry should be achieved at the expense of the SSGC.

"Instead of offering a subsidy to the fertilizer industry, which at times does not pass on the benefit to others, the government should offer fertilizer bags to farmers at a discount. This measure would help farmers in a big way," they said.

The sources conceded that politicians with feudal background had done their utmost to retain the subsidy for fertilizer industry.