ISLAMABAD, March 3: The government has decided to do away with the subsidy on gas given to domestic users and fertiliser factories in order to give relief to commercial, industrial and power sector consumers.

The decision was taken at a recent meeting of the cabinet committee on energy (CCE). The CCE set up another Committee, led by the prime minister’s adviser, Dr Salman Shah, to work out a `rationalisation plan’, a senior official of the petroleum ministry told Dawn.

The official had briefed the CCE that power, industrial and commercial sectors were subsidising fertiliser and domestic consumers to the extent of Rs 29.4 billion. The amount meant for domestic consumers worked out to Rs 12.1 billion and for the fertiliser sector Rs 17.3 billion.

The subsidy will increase by Rs 6 billion to more than Rs 35 billion with the supply of natural gas to the Fatima Fertiliser and the Engro Chemicals.

The petroleum ministry argued that the policy of cross-subsidisation had taken `a heavy toll on international competitiveness of export-oriented productive sector due to unwarranted increase in their cost of production’.

The ministry, therefore, recommended that the policy of `cross-subsidisation should be addressed in a rational and prudent manner’. It expressed an apprehension that failure to take corrective steps would `suffocate’ the industrial sector. “The appropriate way to do away with this cross-subsidy is that the government should pick up this burden through budgetary provisions if at all it wanted to subsidise domestic and fertiliser sectors.”

The petroleum ministry took the initiative when it faced criticism at a meeting of the National Assembly’s standing committee on textile industry (NASCTI) a couple of months ago. The textile industry is opposed to cross-subsidisation on the ground that it has affected exports owing to a high cost of production.

The NASCTI had asked the government to provide subsidies to the textile industry and ensure a level playing field to the industrial sector so that it could compete with other Asian countries.

According to the petroleum ministry, the total gas sales revenue generated by the two gas utilities, SNGPL and SSGCL from the textile sector in 2005-06 was Rs 32 billion.