Economic Coordination Committee defers plan to recover Rs100bn from gas consumers

Published February 14, 2024
Caretaker Federal Minister for Finance, Revenue, and Economic Affairs, Dr. Shamshad Akhtar presided over a meeting of the Economic Coordination Committee (ECC) of the Cabinet at Islamabad on February 13, 2024. — PID
Caretaker Federal Minister for Finance, Revenue, and Economic Affairs, Dr. Shamshad Akhtar presided over a meeting of the Economic Coordination Committee (ECC) of the Cabinet at Islamabad on February 13, 2024. — PID

ISLAMABAD: While approving an already allocated Rs7.5 billion subsidy package for the upcoming Ramazan, the Economic Coordination Committee (ECC) of the Cabinet could not decide how to recover Rs100bn in additional money from gas consumers in the remaining four and a half months of the current fiscal year as the commerce minister pressed for reducing cross-subsidisation burden on industry.

The meeting of the ECC, presided over by caretaker Finance Minister Dr Shamshad Akhtar, took up the Petroleum Division’s summary for increasing gas rates envisaging about Rs70 to Rs300 per unit (mmBtu, or million British thermal units) for various slabs of residential consumers among others.

Informed sources said caretaker Commerce Minister Gohar Ejaz called for minimising the burden of cross-subsidy on the industrial sector. He is also reported to have made a pitch for the continuation of gas to certain Captive Power Plants (CPPs) of the industrial sector, notwithstanding past decisions for shifting industries from their CPPs to the national grid which had surplus generation capacity and declining demand.

Various participants of the meeting raised questions over the size of the gas price increase for various sectors and residential slabs and also sought additional data regarding captive power plants and cross-subsidy impact on the industry and its impact on other consumers in case of subsidy reduction and how to cover the Rs100bn revenue gap determined by the regulator for the two gas utilities for the current fiscal year.

Approves Rs7.5bn Ramazan Relief Package

Therefore, the meeting decided to meet again, most probably on Wednesday, with detailed discussions and data sets sought during a long debate on gas pricing because of a commitment given to the International Monetary Fund (IMF) to revise gas rates by mid-February.

The IMF has also been calling for a complete restriction on gas supply to CPPs to disincentivise gas consumption by mostly inefficient sectors.

Earlier this month, the gas regulator determined an increase in gas rates by 9pc-35pc for gas utilities — Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL) — to extract about Rs100bn more from consumers over the next four months. This is on top of up to 1,100pc increase, according to Pakistan Bureau of Statistics, in November last year — 193pc hike in gas rates and 3,900pc increase in fixed gas charges.

An official statement said the ECC also approved Ramazan Relief Package 2024 for the provision of subsidy to the targeted beneficiaries of Benazir Income Support Programme (BISP) with a net amount of Rs7.493bn which is provided for in the budget for 2023-24.

Wheat imports allowed

On the demand of the commerce minister, the ECC also approved a proposal regarding “Permission to Import Wheat and Export of Wheat Flour under Export Facilitation Scheme 2021” under which registered companies would be allowed to import wheat for re-export of value-added wheat products.

The ECC approved the proposal and directed the relevant ministries to prepare comprehensive proposals for enhancing the opportunities for value-added exports.

The meeting was told that a ban was imposed in 2019 on the export of wheat and wheat products to ensure a sufficient supply of wheat and wheat products including flour, fine, maida, suji, etc. in the local market.

However, some food processing industries have requested that they should be allowed to export processed wheat products, having 20 to 25pc value addition, manufactured from imported wheat under the Export Facilitation Scheme (EFS) 2021 to participate in international tenders for supply of wheat flour to international donor agencies like the World Food Programme as well as supply to various international markets given their consistent demand.

Thus, by allowing Pakistani firms to participate in such international tender for the supply of wheat products, Pakistan can earn substantial amounts of foreign exchange. The commerce ministry suggested that to ensure that the said facility did not distort the supply of wheat in the domestic market, exporters would be required to import their input material (wheat) from international sources under EFS 2021 (import-cum-export) subject to compliance with national import regulations and standards of quality set by procuring donor agencies.

Under the proposal, the facility would be allowed to only companies registered under EFS and they would not be allowed wheat from the local market and the import and export of wheat and wheat flour etc shall be brought under the Track and Trace System of FBR.

The ECC also approved a commerce ministry’s summary (Tariff Policy Wing), regarding “Individual Tariff Ra­tio­nalisation Proposals from Different Sectors for Review of Customs Duties” and directed that tariff rationalisation should be coordinated with the trade policy. It also approved a summary of the Power Division regarding the commissioning of 1,263MW combined cycle power plant of the Punjab Thermal Power (Pvt) Ltd, Jhang (PPTL).

Another proposal of the commerce ministry, a Rs6bn supplementary grant for sharing the subsidy on imported urea on a 50:50 basis, was also approved.

Published in Dawn, February 14th, 2024

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