THE gas development surcharge (GDS) is the only major source of income for Balochistan. The revenue from GDS is however not proportionate to the current cost of investment in Sui gasfields in Bugti area made as far back as 1952. Besides, the countrywide subsidy on gas is being given at the expensive of the province.

The difference between the average well-head cost and average sale price of Sui gas should result in much higher share of the province in the gas revenue. But this has not happened.

Balochistan’s case is that its well-head cost is almost zero, as the investment was made more than 50 years ago. At present, the well-head price of gas produced by Sui is Rs51 MMMBTU and that of Loti and Pir Koh gas is Rs80.90 MMMBTU.

The maximum and minimum sale price of gas from Balochistan is Rs189.6 and 248.18 MMMBTU. If the revenue or energy generated from the Uch gas fields, which exclusively serve the Uch power plant, was taken into account, the GDS should go up to around Rs16 billion a year.

There is a difference in the prescribed gas prices for Sui Southern and Sui Northern. Gas development surcharge is determined and added to the prescribed gas price by the federal government in such a way that it brings uniformity in final consumer prices across the country.

The main beneficiaries of this policy are Punjab and the NWFP because costs of their well-heads are higher. Despite this disadvantage, there should have been a sizeable amount of GDS from the SSGC and SNGPL in which Balochistan’s gas is being supplied.

Balochistan has always been ignored on the GDS issue. Technically speaking, the GDS is a difference between the production and prescribed cost of gas. The prescribed gas cost includes cost of gas, well-head price, excise duty, transmission and distribution expenditure and minimum return to gas companies.

The GDS is mainly recovered only from cement and energy sectors. Balochistan, for having users of its gas in the NWFP and Punjab, suffers losses in gas revenue for two reasons: GDS exemption to the domestic consumers in Punjab and NWFP and the higher transmission and distribution cost for longer distance

Another major grievance of the province has been against the unending profiteering of the gas distribution companies. The total revenue for the province should be around Rs14.647 billion keeping in view the well-head prices of the three wells - Sui, Pir Koh and Loti.

According to an estimate, the GDS revenue payable by the Sui Northern Gas Pipeline Limited (SNGPL) from Sui (on the basis of well-head prices) alone is around Rs11.6 billion and from Loti and Pir Koh gas fields it is about Rs1.334 billion, a total of Rs12.927 billion. But the revenue supposed to be paid to the government of Balochistan from the Sui Southern Gas Company Limited from Sui wells is around Rs1.72 billion.

The province’s share in the gas development surcharge, excise duty and royalty in the fiscal year 1996-97 was 36 per cent which in 1995-96 was 50 per cent. The federal government grants together with the federal excise on gas and the provincial royalty, used to make up from 70-80 per cent of the provincial revenue budget before the NFC Award of 1991.

During FY 2003-04, Rs12.39 billion were given to the provinces under royalty for natural gas, Rs14.70 billion for surcharges, Rs4.18 billion under excise duty on natural gas. Balochistan received Rs2.07 billion less revenue from natural gas in the fiscal year 2003-04, which created a budgetary imbalance for the province. The province witnessed a serious shortfall of revenue receipts from the centre under the head of natural gas revenue. It had received Rs17 billion during the fiscal years 2002-03 and 2003-04, while there was an increase of 11 per cent revenue of the federal and three provincial governments under this head.

Balochistan has been getting merely Rs22 per thousand cubic feet while Sindh is getting Rs126 and Punjab Rs180 for some of the wells. There has been a demand for increase in the well head price of the gas in Balochistan bringing it at par with Sindh and Punjab. If the price were equated with Sindh gas, Balochistan would get additional revenue of at least Rs4 billion.

It is argued that the revenue from natural gas will go down with the passage of time as Balochistan found no new wells and province’s share in transmission of natural gas is shrinking as more wells were found in other provinces.

The excise duty on natural gas is levied at consumption rather than at production level. If the duty were levied at production level, Balochistan could get over Rs10 billion under this head. In other words, imposing central excise duty on natural gas at the consumers’ level has proved to be an injustice for the province.

The centre has not yet resolved the contentious issue of sharing the GDS in the case of Balochistan. It is the important issue that has also kept the province economically under-developed and poor. Although the gas revenue surcharge has been diverted to the province, the situation is not much different, as the federal budgetary grants had been made non-obligatory in NFC 1991. The Award had resulted in an increase in the federal tax assignments to the province from federal divisible pool.

Prior to the announcement of the provincial budget 2006-07, the GDS created difficulties for the provincial government. The cut in the province’s gas revenue, particularly the GDS for the FY 2006-07 has adversely affected the PSDP.

For the FY 2005-06, Balochistan was to get Rs5.3 billion from the GDS but in the revised estimates, it was scaled down to Rs4.8 billion. In the current fiscal year, Balochistan is to receive Rs3.5 billion only. This reduction of Rs1.3 billion is a serious financial blow to the province.

Islamabad had informed the Balochistan government about reduction in the GDS amount for the current financial year. The provincial government had urged the centre to appoint an arbitration commission for its dispute with Sindh over gas development surcharge and royalties but the request was not conceded.

In 1991 NFC award, it was decided to divide the income from GDS among the provinces on the basis of the gas produced from the concerned province. Unfortunately, there was little increase in the gas production in Balochistan while the over all system was on gradual expansion. Thus, the income of the province under this system constantly decreased over the years. The entire revenue from GDS should be given to Balochistan government, as the other provinces have no share in it.

Balochistan has suffered because of the discriminatory policies of the successive central governments. Ironically, while the federal government is arbitrarily subsidising the sale of natural gas from Balochistan to consumers in other provinces without the province’s consent, the province is left with very little funds to finance its annual development programme.

The subsidy for Sindh is around Rs1.720 billion and for Punjab and the NWFP Rs12.927 billion. The subsidy being given to the fertilizer plants in terms of fuel, amounts to Rs1.054 billion, cement sector Rs34.64 million, fertiliser (feedstock) Rs31.03 million, CNG Rs24.12 million, general industrial sector Rs424.15 million and commercial sector Rs54.67 million. All the subsidies are being provided at the cost of Balochistan.