LPG policy and CNG taxes to be decided by ECC


A special meeting of the Economic Coordination Committee of the Cabinet (ECC) will decide on the Liquefied Petroleum Gas (LPG) policy, which seeks imposition of a levy equal to the difference in the prices between the locally produced and imported LPG on Tuesday.
Natural gas covers 51pc of country’s energy supply
An official source said that the ECC would decide on LPG imports and introduction of LPG in the auto sector. The meeting will also decide on gas sharing between the two Sui companies from the Iran Pakistan gas pipeline project. The government is embarked on an ambitious programme to change the fuel supply mix by December 2012. At present nearly 51 per cent of the country’s total energy supply mix of 66.5 million TOE is met through the supply of natural gas, while the oil has 29.4 per cent share and electricity 11.8 per cent. This heavy dependence on gas has created a shortage of 2 billion cubic feet per day (bcfd) which has had a crippling affect on the economy.
The new policy establishes linkage of local LPG producers price with Saudi Aramco contract price plus import incidentals instead of the previous policy of FOB Saudi Aramco contract Price. The proposal entails enhancing the local LPG price by approximately $100-120 per metric tonnes, being the marine freight and other import incidentals which would be collected by the federal government as levy.
Policy to help govt generate Rs3 b per annum
Since there would be no price difference between the local and imported LPG, imports would increase ending pressure for seeking LPG allocation by non-allocatees. It would help with an additional revenue generation of approximately Rs3 billion per annum besides increased sales tax at import and subsequent stages. It would ensure price stability and enhanced LPG availability for the consumers who are, at times, paying much higher price than that of international LPG, due to shortage. The local LPG production has declined from 1,600 to 1,100 million tonnes per day. The imports have remained at an average of 140 million tonnes per day during last 4 years. The main reason for low import was price differential between imported LPG and local LPG that increased gap between demand and supply, resulting into non availability of LPG, its black marketing, short measurement and decantation problems.
Levy on CNG retailers to generate Rs12 b per annum
According to the source the Petroleum Ministry has moved the summary to impose Rs5 per kilogram levy on sale by CNG station owners. The levy on CNG station is proposed to force CNG owners to share their huge profits with the national exchequer. The taxation would help generate close to Rs12 billion per annum.
The Ministry has also recommended that the imported gas from IP gas pipeline should be divided on 65 and 35 per cent basis between the Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC). The gas would be provided for power generation purposes. The government is aiming to expedite imports through IP gas pipeline to December 2012 from December 2014.
The projections indicate that SNGPL system would be facing a shortfall of 1.8 bcfd while SSGCL would be facing a shortfall of 0.5 bcfd in 2014-15. Even at present, the power plants connected with SSGC and SNGPL are facing an un-met gas demand of 700 mmcfd.