ISLAMABAD, Dec 8: The gas development surcharge (GDS) calculation formula has become a contentious issue for the National Finance Commission (NFC) as its largest recipient Balochistan wants to increase its share by at least 300 per cent.

“The issue will come up for discussion at an informal provincial finance ministers’ meeting on Dec 12 and subsequently at the second formal NFC meeting on Dec 13 at Lahore”, an official of the finance ministry told Dawn here on Sunday.

A couple of meetings on the issue held at the ministry of finance during the last week remained inconclusive as the federal government rejected Balochistan’s demand and termed these “illogical” and “unjustified”.

If Balochistan’s demand was met, then natural gas price would increase manifold throughout the country and the commodity would go out of the reach of the majority of the consumers, the official said.

“The issue will now be discussed at the NFC level,” secretary petroleum M. Abdullah Yousaf said when contacted. “They have come up with a couple of new calculation formulae which are not justified,” he said.

Of the total annual GDS of Rs15 billion, more than Rs7 billion goes to Balochistan. The calculations are made as per the 2002 petroleum policy prices and at the rate of 12.5 per cent of wellhead price fixed under the 1973 Constitution.

Balochistan is demanding that GDS should be calculated at the rate of newly discovered gas fields in the country and wants to make Ratana gas field in Punjab as the base price instead of decades-old wellhead price of Sui field.

The problem with the federal government is that if this demand is accepted, Balochistan’s GDS share would go up to Rs20 billion per year from the current level of Rs7 billion. Ratana’s wellhead gas price is around Rs200 per mmbtu while the wellhead price of Sui field is around Rs50 per mmbtu.

Sources close to the Balochistan chief secretary, who was here last week, said the federal government had earlier agreed to consider GDS calculations on the basis of Ratana gas field and even carried out an exercise in this respect but later backtracked when the consultant submitted its report.

An official at the ministry of finance confirmed that such an exercise was carried out but said there was no decision to link Balochistan’s GDS with that of Punjab or Sindh. He said Ratana was a small field, lay in a high risk area and its higher price did not impact overall gas prices.

He said it would be an over simplification of the issue to say that Sui field’s GDS should be market-based because new fields in Sindh and Punjab had higher rates.

Balochistan is of the view that it has been put at a disadvantageous position despite the fact that it is the largest producer and has been feeding the country since independence. Contrary to this, Punjab and Sindh (comparatively new gas producers) are getting higher GDS rate because of higher producer price of gas which is now linked to the international oil prices, it contends.

The federal government has told Balochistan in clear terms that GDS formula for Sui would remain unchanged. However, if the provincial government wants to increase its GDS share, it should open up areas where the federal government has awarded exploration licences, but the local and foreign petroleum companies have not been allowed to start work owing to resistance from the tribal leaders.

The finance ministry official said Balochistan had been asked to discuss the issue with the finance ministers of other provinces and convince them to work out a formula for a uniform GDS calculation throughout the country out of their provincial shares.