LAHORE: The government has transferred a sum of Rs25.7 billion into the accounts of Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Co (SSGC) to pay for the promised subsidy in gas to equalise prices across the country, an SNGPL official confirmed to Dawn on Tuesday. “The funds have arrived and the adjustments to industry bills will be made in the next billing cycle that will end in late January,” the official said.

Export sectors in Punjab were promised an equalisation of gas prices versus their competitors in Karachi, who enjoy priority access to domestic gas since Sindh is a gas producing region. As a result, Punjab exporters are provided a mix of 28 per cent domestic gas and 72pc imported RLNG. As a result, they were paying close to double of what industry in Karachi pays for the vital fuel.

In the January bills, export sectors will receive a rebate for all imported gas consumed between Oct 15 and Jan 15, the official said. From Oct 16 onwards, the export sectors of Punjab have been provided RLNG exclusively according to the official, and they will be reimbursed the amount they have paid on their bills beyond $6.5 per mmBtu since then.

Another commitment that the export sector had been given was that their gas mix will be evenly divided between domestic and imported gas. That will begin “after the winter months,” the official said. The Rs25.7bn amount might well be sufficient to keep the price of gas at $6.5 for all export oriented industries till the end of the fiscal year, the official said. He also confirmed that supply for captive power units will be covered by the subsidy too.

Pakistan’s gas mix is tilting heavily towards growing reliance on imported RLNG, which is more expensive compared to the heavily subsised domestic gas. But as gas fields around the country pass their peak, and new exploration has not yielded any major new finds, there is little option but to import. Exact quantities of imported gas vary from month to month, as does the price since it imported gas is pegged to the price of Brent crude. In the month of November, for example, SNGPL had 2.5bn cubic feet per day in its system, of which 1.1bcfd was RLNG and 1.4bcfd was domestic gas.

Since the demand for domestic gas shoots up among household consumers in the winter across Punjab and KP provinces — the area served by SNGPL — industry is offered to shift entirely to imported gas or shutdown operations for a few months. Early in the tenure of the PTI government, when faced with external sector difficulties, they asked the export oriented sectors for advice on how to lift exports. They were told by the All Pakistan Textile Mills Association that equalizing the price of gas across the country was an important priority. An Economic Coordination Committee meeting approved their request in October, but it has taken this long to arrange for the mechanism through which this price equalization can be effected.

Published in Dawn, December 26th, 2018