The federal cabinet, scheduled to meet next week, is likely to approve the proposed Gas Infrastructure Development Cess bill, paving the way for the imposition of a new levy on gas consumption “over and above the fixed gas sale price” to generate billions of rupees to develop natural gas infrastructure for the imported Liquefied Natural Gas (LNG), Iran Pakistan (IP) gas pipeline and the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline.
The draft legislative bill on gas infrastructure development prepared by the Petroleum Ministry, a copy of which is exclusively with Pakistan Today, will come under consideration of the federal cabinet scheduled to meet on October 12. According to the proposed piece of legislation, the gas surcharge will be charged over and above the fixed gas sale price. The levy will be payable at such rate and manner as determined by the government from time to time and the government will have powers to determine interest on the amount not paid within the due time by the companies, the proposed bill adds.
The bill proposes that the companies Sui Northern Gas Pipelines Limited, Sui Southern Gas Company Limited, Mari Gas Company Limited, Pakistan Petroleum Limited and Tullow Pakistan Development Limited shall pay Infrastructure Development Cess at such rate and in such manner as the federal government may, by rules, prescribe from time to time.
On utilisation of Infrastructure Development Cess, the proposed piece of legislation says in Clause 4: “The Infrastructure Development Cess shall be utilized for or in connection with infrastructure development of Iran Pakistan Pipeline Project/LNG and other Projects and/or for price equalisation of other alternative fuels.” The draft bill says no court shall take cognizance of an offence under this ordinance save on a complaint in writing made by or under the authority of the federal government.
The proposed draft bill adds that the amount paid by a company as Infrastructure Development Cess shall be an expenditure for which allowance is to be made under the Income Tax Ordinance, in computing the profits or gains of that company. The summary prepared by the Petroleum Ministry, which is attached with the proposed bill, says that to meet the widening demand-supply gap of natural gas, which has a contribution of 48 percent in the country’s primary energy mix, a number of gas import projects are being pursued including LNG, IP and TAPI.
In case the required gas infrastructure is not developed on an urgent basis the government would be forced to import liquid fuels at much costlier price as compared to gas. Currently, neither the government nor Sui companies have adequate funding to implement the above projects and create the required infrastructure. The summary says further that the estimated gap between demand and supply is projected to increase from 1.6 bcfd in 2011-12 to over 2.5 bcfd in 2014-15. The IP pipeline project will bring in 750mmcfd gas, the first gas flow of which is expected in 2014.
The project involves construction of a 781 kilometre gas pipeline from the Iran-Pakistan border to Nawabshah to inject gas into the transmission system of the two gas utility companies. The estimated cost of the project is approximately Rs 108 billion. The TAPI pipeline project will bring in 1,325 mmcfd gas, first gas flow of which is expected in 2016.
