ISLAMABAD: Ahead of approaching elections, the government has decided that the gas utility companies — Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipelines Ltd (SNGPL) — would bear the cost of provision of gas to new localities within the 5km radius of gas fields.

A decision to this effect was taken at a meeting of the Council of Common Inte­rests (CCI) held on Nov 24, according to minutes of the meeting conveyed to the gas companies.

In view of sparse population density in Balochistan, the CCI also ordered that “if no village is located within the 5km radius, the provision of gas to nearest tehsil or district headquarters would be ensured”.

It was decided that the cost over and above the criteria will also be borne by gas utility companies which will be recovered through tariff adjustment. This however, will apply only to the locality and villages which fall within the 5km radius of gas producing fields.

Provinces will submit proposals to CCI to revise per consumer cost spectrum

It was also decided that the present per consumer cost spectrum — Rs54,000 for Sindh, Rs108,000 for Punjab and Rs270,000 each for Khyber Pakhtunkhwa and Balochistan — would be revised keeping in view inflation and other relevant factors for which the provincial governments would submit their proposals to the CCI in its next meeting.

The CCI was informed that inter-provincial coordination committee (IPCC) had already agreed that all expenditure involved in the provision of gas should be borne by the gas utility companies concerned and the federal PDSP. “Security of pipelines and installations would, however, be the responsibility of the provincial governments concerned.”

The Petroleum Division was of the view that the cost incurred above the criteria be met out of gas development surcharge (GDS) by the provinces as GDS was given to the provinces in the NFC Award. At this juncture, the Balochistan chief minister raised the issue of 5km radius being inadequate in the context of his province where average distance between villages and the nearest locality was 50km (approximate), adding that only Jhal Magsi was within the 5km radius.

On a point raised, the prime minister observed that exploration and production (E&P) companies were paying royalty and taxes and they had no provision to incur such extra expenditures.

The Punjab finance minister suggested that the issue of Balochistan may be disused separately and the CCI agreed to the proposal. The KP chief minister demanded that additional expenditure should be borne by the federal government as annou­nced by the then prime minister some 20 years back.

The prime minister reiterated that the E&P companies have no provision for such expenditure and informed the house that the referred announcement of the prime minister was about only one field and it should not be considered a policy for the future. He said the federal government did not have fiscal space in the Public Sector Development Programme (PSDP) to meet such expenditure. He also told the chief ministers that utility companies were purchasing gas at the rate of Rs600 per MMCFD and charging the domestic consumer Rs100 per MMCFD which was a huge subsidy on part of the centre.

Earlier, the IPCC had recommended applying uniform costing criteria for provision of natural gas to consumers within 5km radius of the gas producing fields in all the four provinces without putting additional financial burden on provincial governments.

The IPCC had resolved that the federation should absorb the additional cost, most probably, out of allocations for Sustainable Deve­lopment Goals (SDGs) commitment of the prime minister, energy for all and Gas Infrastructure Development Cess (GIDC) in the PSDP.

The centre originally wan­ted the provinces to cross subsidise each other, particularly three provinces bearing additional burden of Balo­chistan through a uniform rate to compensate for decades of gas supplies it made to the national gas system. The three provinces turned down the request and instead complained against non-implementation of Article 158 of the Constitution by the centre.

At present, the criteria for the provision of natural gas to consumers within 5km of the well-head varied because of cost factor arising out of distance and maintenance of the pipeline network. This cost per consumer is borne by the SNGPL and SSGCL but the provincial and federal governments, depending on their political compulsions and interests, are required to provide additional funds in case the cost gets higher than the criteria.

Published in Dawn, December 22nd, 2017