ISLAMABAD: The government on Wednesday approved incentives for use of imported liquefied natural gas (LNG) and allowed 570,000 tonnes of urea import.

The decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, presided over by Finance Minister Ishaq Dar. The committee will meet again on Thursday to complete the agenda.

The meeting also approved a number of amendments to Oil and Gas Regulatory Authority (Ogra) Act to provide legal cover to a set of responsibilities the regulator was already performing under weaker rules, executive orders or ECC decisions.

Know more: ECC approves 700km LNG pipeline project

On the request of the Ministry of Petroleum and Natural Resources, the ECC exempted the import of LNG from Gas Infrastructure Development Cess (GIDC) as determined by a secretarial committee.

The committee, led by secretary of finance, and comprising secretary of petroleum and chairman Federal Board of Revenue (FBR), had concluded that the GIDC was not applicable to imports.

The ECC, however, decided to levy five per cent GST on LNG import in any case, instead of prevailing general sales tax rate of 16 per cent.

The finance minister said that the decision to exempt LNG from GIDC and to charge lower GST was being taken to facilitate the general public and encourage investment in the sector.

“We cannot allow total exemption from general sales tax because we want to promote tax culture. If business is thriving, there is no harm in contributing a small percentage to the exchequer,” he added.

An official said that given the fact that the furnace oil being used in power houses was exempted from tax, the government wanted the production costs to remain on the lower side with LNG imports being lined up.

The imported LNG would mostly be used in the power sector in case of imports by the public sector and in the CNG sector by the private sector in the initial phases.

The decision was immediately welcomed by All-Pakistan CNG Association.

Ghiyas Abdullah Paracha of the APCNGA said the ECC decision would allow CNG sales to be 25-30pc cheaper than petrol and encourage new investors to set up more LNG terminals and related infrastructure.

He said the decision would not only protect Rs450bn worth of existing investment in CNG industry, but allow Rs100bn fresh investment, protect 10,000 endangered workforce employed in the CNG industry and facilitate consumers.

The ECC also directed the ministry of petroleum and Ogra to mutually develop gas pipeline development investment plan for LNG sector and additional domestic gas supplies within a week to facilitate LNG imports early next year.

The ECC also allowed Port Qasim Authority (PQA) to buy or lease four LNG compatible Tug Boats from its own resources and use them on commercial lines.

It directed that tug boats should be made available before Jan 7 next as LNG shipments would be due by that point in time. The service charges for these boats would be mutually negotiated by PQA and ministry of petroleum.

UREA IMPORT: The committee also approved a proposal by the ministry of industries and production for allowing import of 185,000 tonnes of urea by the Trading Corporation of Pakistan through Saudi Business and Industrial Credit (Sabic) facility by Dec 15 for coming Rabi crop season.

It also allowed import of another 385,000 tonnes of urea as soon as possible from international market. The foreign exchange required for the import of the stock will be approximately around $123.92 million and would involve Rs4.19 billion of subsidy.

OGRA ORDINANCE: The ECC also cleared a proposal of the cabinet division for amendment to the Ogra Ordinance 2002 to monitor and establish prices of all refined oil products in the country to legally empower Ogra through an ordinance to continue performing functions it was doing at present without proper legal cover.

The amendments would now be referred to the Council of Common Interests (CCI) for formal approval as advised by the ministry of law and justice.

On the indication of Ogra, a committee, led by minister for science and technology, Zahid Hamid, had agreed that Ogra was dealing with pricing of oil products under a simple decision of the ECC which needed to be protected through a change in the Ogra law.

Likewise, it was also noted that CNG business had not been covered under section 43(b) of the Ogra Act as a result of oversight at the time of 18th Amendment and CNG pricing and well-head pricing were being done under simple notifications which could create legal complications.

On the recommendations of this committee, the ECC cleared amendments in the rules guiding oil sector regulations, including monitoring the prices of petroleum products in the market, definition of petroleum products and CNG.

Proposed amendments would also provide protection to powers and functions of the Ogra as well as role of the federal government in determining the well-head gas prices, imported gases in the pricing of natural gas, and power to determine prices without public hearing under certain conditions.

It also deals with imposition of fines and penalties, and determining and notifying the maximum sale prices of CNG to be charged by a licensee from a consumer for vehicular use. The ECC also permitted Packages Limited for equity investment abroad through a special purpose vehicle in Mauritius with an initial remittance of $100,000 with restriction that the equity investment would not exceed $15 million.

Published in Dawn, October 30th , 2014

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