KARACHI, May 2: A meeting of the finance ministers of Sindh and Balochistan is being held on Tuesday to sort out the issue of distribution of the royalty on natural gas and the gas distribution surcharge between the two provinces. This meeting is the follow-up of the informal meeting of the National Finance Commission (NFC) held at Islamabad last week where apparently no headway was made towards reaching the consensus.
Islamabad now wants the four provinces to reach consensus on horizontal distribution of resources and payment of royalty and share in gas development surcharge remains one of the contentious issues with Balochistan. Balochistan is the oldest supplier of natural gas to all the three other provinces of the country that dates back to more than 50 years. Even now Balochistan is the single largest producer of the natural gas. But the amount it gets as royalty and share in the gas development surcharge apparently does not commensurate with its gas production potential.
The 2004-05 budget documents stipulate allocation of Rs 3.59 billion share in gas development surcharge for Balochistan. It is expected to receive Rs2.37 billion royalty on the natural gas during current fiscal year. Sindh will get Rs10.35 billion share in gas development surcharge and Rs8.72 billion royalty on the gas during 2004-05. Punjab is the biggest consumer of gas from Balochistan and produces a very small quantity of gas which is consumed within the province will get Rs1.2 billion share in gas development surcharge an about Rs720 million royalty.
The NWFP is just a consumer of the gas and does not produce it but will get Rs51.52 million share in gas development surcharge and Rs118 million royalty.
According to the Pakistan Energy Year Book, Balochistan produced 374,161 million cubic meters of gas in 2001. Out of this only 62,138 million cubic meter of gas was consumed within the Balochistan and the more than 312 million cubic meter was exported. With a big industrial base and a vary large number of domestic consumers Punjab is the biggest user of gas from Balochistan followed by the NWFP. Sindh gets only 6 per cent of its 365, 970 million cubic meters of gas from Balochistan.
“Bulk of Balochistan’s gas goes to Punjab and the NWFP and hence the transmission cost is higher,’’ argued a well placed source in Sindh. In case of Sindh the gas production is 479,370 million cubic feet. Its bulk quantity is consumed within the province and hence the transmission cost is relatively small.
Two companies are supplying the natural gas. One is the Sui Northern Gas company in Punjab and the NWFP. The other is Sui Souhtern Gas which caters to Sindh and Balochistan. Both the companies have enhanced their gas transmission capacities. The SNGPL has completed is transmission expansion project at a cost of Rs9.5 billion and the gas from Sui, Qadirpur, Zamzama and Sawn have started flowing in to its system. In 2003-04 about 1,270 million cubic feet gas a day was supplied resulting in saving of 700 million dollars. The SSGL has also completed its major components and about 400 mmcf has started flowing in the system.
The gas development surcharge is calculated by adding the well-head production cost with that of transmission and distribution. Its differential with the sales price of the gas is the gas development surcharge.
Punjab remains the single biggest consumer of gas. It consumes over 374,000 million cubic meter of gas. It produces only 70.27 million cubic meters of gas which is consumed within the province and hence the transmission cost is very small.
The current well head price put into effect from the current fiscal year from July last year is linked with the international price of crude oil and furnace oil. It includes excise at well head fixed by the government, transmission and distribution costs including the depreciation and the minimum return to the gas companies as stipulated in the World Bank and the Asian Development Bank.
Retired Brigadier Gulfaraz who is now the private member of Balochistan on NFC, had been the federal ministry of oil and gas and natural resources. He was to a great extent responsible for the policy that paid a meagre amount of royalty and share in gas development surcharge to Balochistan. As a private NFC member he is endeavouring to compensate for all the losses that Balochistan suffered in the past. The retired Brigadier lives in Islamabad and his nomination on the NFC as Balochistan’s private member was initially resisted by the former Prime Minister Mir Zafarullah Khan Jamali.
