ISLAMABAD: Prime Minister Nawaz Sharif on Monday approved ending a moratorium on fresh bulk gas connections to domestic, commercial and industrial consumers and ordered settlement of growing circular debt for smooth running of the energy sector.

He took these decisions while presiding over a meeting of the Cabinet Committee on Energy (CCoE) and directed that the structure for the new gas connections, primarily to be based on imported liquefied natural gas (LNG) be submitted to the forthcoming meeting of the federal cabinet for formal ratification and implementation.

The prime minister also constituted a three-member committee comprising the secretaries of finance, water and power and petroleum and natural resources to work on a war-footing to propose a way out of energy sector circular debt that has ballooned again closer to a level the PML-N government inherited in 2013.

The committee “approved new Re-gasified Liquid Natural Gas (RLNG) based gas connections for domestic, industrial and commercial consumers” that would be placed before next meeting of the federal cabinet for ratification, an official statement said.

PM orders settlement of circular debt that touches Rs350bn

Informed sources said the secretaries for water and power and petroleum gave separate presentations to the committee, the first focusing on loadshedding plan and electricity shortfalls and the second one on receivables of oil and gas companies exceeding Rs350 billion and the need for opening up gas connections to bulk and large consumers like industries and housing colonies with expected inflows from abroad.

There has been a general moratorium on new gas connections for almost eight years imposed by the former PPP prime minister Yousaf Raza Gilani amid acute shortfalls.

In his presentation, Secretary Petroleum Arshad Mirza is reported to have explained that the moratorium for such a long time was having lasting negative impact on industrial expansion and could not be maintained forever. Likewise, there were a lot of housing colonies and plazas coming up who were showing willingness to pay higher rates for bulk purchases.

Now the government was already importing about 400 million cubic feet per day (mmcfd) of LNG, going up to 600mmcfd in a few years, followed by another 600mmcfd LNG expected to flow in with completion of the second LNG terminal in a few months, there was a need to create new consumer class that can afford higher landing cost of imported RLNG.

The new consumer class would be given an option to pay higher rates to be approved for RLNG to secure uninterrupted gas supplies. This would mean the large domestic consumers and those ready to purchase in bulk (housing colonies and plazas) would be charged higher than the highest rates currently charged to existing domestic natural gas consumers.

At present, the RLNG is being provided to fertiliser, industrial, electricity and transport sectors because of limited imports but the RLNG users would increase as the government ramps up imports with additional LNG terminals coming up. The government is targeting increasing LNG imports to almost two billion cubic feet per day (BCFD) by next year from existing 400-500mmcfd, as fresh terminals come on line starting July this year.

The idea was to extend RLNG supplies to all those who can afford it by making the imported product a part of domestic gas through Weighted Average Cost of Gas (WACOG) while protecting the lower and middle income consumers from a major price hike.

The move is aimed at improving the cash flows of the gas utilities and also to give a policy signal to rich consumers to opt for alternative fuels if they could not control their consumption. “They should not have unlimited access to a scarce resource at subsidised rates,” the official explained.

At present, domestic consumers using more than 300 cubic metres of natural gas per month are charged at the rate of about Rs700 per million British thermal unit (mmBtu) compared to less than Rs280 per mmBtu to consumers using less than 300 cubic metres a month. In contrast, RLNG is currently priced at about Rs1000 or above per mmBtu. That would mean the price for large domestic consumers could be increased by 40pc for the purpose of price parity with CNG, industry, fertiliser and power sector.

The meeting was told that a total of 5,710 megawatts would be added to the system by the end of 2017. The prime minister emphasised that it was the highest priority of the government to completely eliminate loadshedding in the shortest possible time. The government has steadfastly worked in the last three years to achieve its cherished goal post and all the base work for achieving this target has been completed. “With more than 8,000MW of new generation scheduled to come into the national grid before June 2018, we are well on course for a loadshedding-free Pakistan,” he said.

He directed early completion of power projects without compromising on efficiency and quality of work and ordered enhanced coordination among different government organisations to facilitate end consumers. “No laxity would be tolerated with regard to timelines for completion of ongoing projects”, he was quoted as saying in a statement.

The meeting was told that receivables of the oil and gas companies against power companies were now touching Rs350bn including Rs240bn of Pakistan State Oil, Rs55bn of Oil and Gas Development Company Limited, Rs10bn of Sui Southern and Rs25bn of Sui Northern and Rs20bn of Pakistan Petroleum Limited.

Published in Dawn, April 11th, 2017