The meeting was informed by the secretary finance that inflation was on a declining trend and manufacturing showed positive trend. - File photo

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet remained engaged in serious disputes over high price for procurement of sugar for strategic reserves and about 100 per cent proposed increase in purchase price of low-quality natural gas and failed to take decisions on both counts.

The meeting presided over by Finance Minister Abdul Hafeez Shaikh, however, approved providing a Rs6 billion bank guarantee to the Pakistan Steel Mills to help it procure raw material to avoid mill closure and agreed in principle to fund a Rs2 billion pipeline to divert natural gas from a depleting field Latif field in Sindh from Kandarwari to Sawan gas field facilities to enhance supplies by up to 70 million cubic feet per day (mmcfd).

Senior government officials told Dawn that the ECC remained in session for about four hours but most of its time was consumed by two issues of sugar price for strategic reserves and the powers of the ECC to decide about pricing of low-BTU gas.

As a result, the meeting could not take up important agenda items like a proposed ban on CNG kits and equipment to discourage further use of natural gas for private transport, change in winter gas load management plan as desired by the prime minister and the allocation of Iranian gas. Therefore, it decided to convene another meeting on Thursday next to consider these issues.

Informed sources said the Trading Corporation of Pakistan informed the ECC that its tender to procure 200,000 tons of sugar from domestic mills for strategic reserves attracted the lowest price of Rs63 per kg offered by Kashmir Sugar Mills while all other offers were on the higher side despite the fact that sale price of the commodity in the open market was quite low and hovered around Rs65 per kg.

This indicated that sugar millers wanted to ensure a higher price of about Rs70-75 in the retail market for the ongoing season.

Most of the participants viewed that even the lowest price was not reasonable because it would go beyond Rs70 in the retail market after inclusion of transportation charges and intermediary profit taking by the supply chain.

Some of them suggested that the procurement should be staggered given the fact that fresh production from mills had already started and the prices were expected to come down. After a lot of debate the committee asked a sub-committee to get in contact with sugar mills to reduce their offer prices.

LOW BTU GAS: The ECC considered a proposal of the petroleum ministry to offer a higher price of about $8.75 per mmbtu to gas producers who could improve low-BTU gas standards to pipeline quality by increasing its heating value. The existing gas price of gas from new fields under the proposed 2011 policy comes to about $4.50 per mmbtu and of existing fields at $2-2.5 per mmbtu.

The ministry had estimated that low-BTU gas from fields like Kandra, Diwan, Sara West etc., could supply about 300 mmcfd of gas provided they were offered higher price. These fields are reported to have combined reserves of about 2.75 trillion cubic feet but remained unutilised for being of non-pipeline quality. Also the newly discovered Zin field in Balochistan also had low heating value gas which should be offered higher price to come on stream.

Minister for Water and Power Syed Naveed Qamar, however, objected to the proposal on grounds that the issue did not fall under the ECC’s jurisdiction because major decisions relating to oil and gas should be taken by the Council of Common Interest (CCI).

He was of the view that the matter involved much higher gas prices that will have impact on all provinces besides the 18th Amendment had given hydrocarbon rights to the provinces, the issue should be referred to the CCI for a consensus decision by provincial governments.

After a lengthy debate, the copies of the constitution of Pakistan were specially brought in for reading but the dispute remained unresolved. It was therefore decided to seek a formal legal opinion from the law ministry on the issue.

GAS DIVERSION: The ECC was informed that a depleting Latif Gas field of OMV-Pakistan in Sindh has been supplying gas through a pipeline from Kandarwari gas but the Kandarwari Joint venture led by ENI of Italy had expressed its inability to continue with the arrangement owing to its own increased supplies and resultant capacity constraints.

The OMV joint venture has informed the government that in view of depleting supplies and limited reserves, it was not economically feasible for it to lay a 50-km pipeline to divert supplies to a nearby Sawan field.

Since, the field can provide about 87 mmcfd of gas by diverting it to Sawan, the government agreed to provide Rs2.3 billion to the pipeline on behalf of Sui Northern and Sui Southern gas companies on 50:50 per cent basis.

After complete depletion of the Latif field in about eight years, the Sui companies would be allowed to shift the pipeline to somewhere else, an official said.

A sub-committee headed by deputy chairman Planning Commission was constituted to suggest implementation plan and recommend enabling changes in the petroleum concession agreement.

ECONOMIC SITUATION: The meeting was informed by the secretary finance that inflation was on a declining trend and manufacturing showed positive trend.

He, however, warned that Pakistan’s exports could come under pressure in the coming months because of the current economic crisis in Europe and USA. He also pointed current decreasing Foreign Investment saying “It can be matter of concern”.

The meeting directed the Board of Investment and State Bank of Pakistan to come up a presentation on Foreign Investment in next meeting, which will tell the ECC about detailed process of calculating investment in the country, concerns of different companies for non-investment, reasons of low investment and their subsequent remedies for revival of investment.