In a major policy decision, the Economic Coordination Committee of the cabinet on Thursday approved diverting of gas available in dormant Latif gas field to nearest gas Sawan processing plant to reduce the natural gas shortages in the short term. The committee also allowed procurement of 200,000 tonnes of sugar from the local sugar mills. It approved in principle the low BTU gas policy and referred it to the Council of Common Interests for approval. It also approved providing of sovereign guarantee of Rs6 billion on Pakistan Steel Mill’s (PSM) behalf, to the National Bank of Pakistan.
Building capacity utilisation
Secretary Finance Dr Waqar Masud Khan told Profit that ECC approved diversion of raw gas from Latif field to the nearby Sawan processing plant. He said it would allow injection of 100 mmcfd gas in the system. He said the state owned gas utility companies will make an investment of Rs2.3 billion to lay a 50 km pipeline to take the raw gas to Sawan plant. He said a sub committee was formed to suggest amendments in the Petroleum Concession Agreement of Latif field. He said the committee also directed bringing other dormant fields online.
Overcoming gas shortfall
ECC deliberated on the summary proposed by Ministry of Petroleum which considered laying of a new 50 km pipeline from Latif field to Sawan plant where surplus capacity is available that can be used for processing. Foreign operators were reluctant to make additional investment in the construction of pipeline connecting Latif field to Sawan plant saying it was not economically feasible due to low gas price capped at $2.64 per mmbtu as allowed under Petroleum Policy 2001. Since there is acute shortage of gas on the system of two state owned gas utility companies, it was decided to buy raw gas at Latif field gate and take it to Sawan plant for processing, provided the Oil and Gas Regulatory Authority allows this expenditure as admissible for determination of their revenue requirements and will become part of consumer gas price. Approving the proposal, ECC formed a sub committee comprising Deputy Chairman Planning Commission and representatives from ministries of finance and petroleum and OGRA. The sub committee will be forwarded their recommendation to ECC regarding enabling steps and adjustments with the petroleum policy. Secretary finance said the meeting also approved in principle the low BTU policy that allows giving incentives for increasing the value of the gas to investors. He said the policy was referred to the Council of Common Interests for approval.
Sovereign guarantee for Steel Mills
He said the committee also approved giving sovereign guarantee for a loan of Rs6 billion to PSM. The government, he said, was engaged in strategic thinking on how to run the entity. The cabinet committee on restructuring (CCOR) has already decided that PSM will be kept operational and for meeting its raw material requirements a financing facility will be provided to the entity. Only the ECC is authorised to provide sovereign guarantee. ECC also approved summary of Ministry of Industries for purchasing 200,000 tonnes of sugar from local market for strategic sugar reserves and supply to Utility Stores in coming months. However the committee directed that the sugar should not be purchased at cost higher than the prevailing market value. It formed a sub committee comprising of finance, fndustries and commerce secretaries to formulate a mechanism to negotiate with the sugar mill owners the purchase of sugar below market price.
CPI falls to 11%
Secretary finance briefed the committee on the key economic indicators and said inflation has decreased with overall Consumer Price Index (CPI) in October, 2011 at 11 per cent as compared to previous year’s value of 15.3 per cent in same month. Inflation on food items has decreased from 21.0 per cent to 11.7 per cent and non food items from 11.9 per cent to 10.5 per cent this year. He informed that there is a sudden downfall in Sensitive Price Index (SPI) with a latest value of 5.70 per cent. The prices of most food items with the exception of rice have decreased, he said.
Concerns over falling FDI
He highlighted that Large Scale Manufacturing has depicted great performance this year but export may come under pressure in the coming months due to the current economic crisis in Europe and USA. Foreign Exchange Reserves stand at $16.90 billion on November 28, 2011. He also pointed out that the falling Foreign Investment can be a matter of concern, but this decrease is mainly occurring in portfolio investment. ECC directed the Board of Investment and State bank of Pakistan to come up with a presentation on foreign investment in the next meeting covering the detailed processes of calculating investment, concerns of different companies for non-investment, reasons of low investment and their subsequent remedies for revival of investment. ECC also stressed that this current decreasing trend of inflation is not being projected among the general public properly. There is a dire need that this information gap be reduced, so people would be informed about all the positive changes as well. In this regard, media should play its role and inform the public about all positive indicators.
