Petroleum Ministry steps on the gas

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After concluding two gas pipeline import agreements and possibility of Liquefied Natural Gas import being intensely worked out, the Petroleum Ministry has sought imposition of gas infrastructure development cess at the maximum limit to generate funds for laying completely new gas infrastructure for transmitting the imported gas to the national transmission network.
An official source said that the Petroleum Ministry has sought hike in gas cess on the fertilizer sector from present level of Rs 197 per mmBTU to Rs 300 per mmBTU, CNG in region one from Rs 144 to Rs 300 mmBTU and in region two from Rs 79 to Rs 200 mmBTU, industrial sector Rs 13 to Rs 100 mmBTU, GENCOs and KESC from Rs 27 to Rs 100 per mmBTU and IPPs from Rs 70 to Rs 100 per mmBTU.
The government had imposed gas cess from the start of the current calendar year. It was to be used for developing new gas infrastructure and subsidizing the alternate fuels to shift the energy mix that has become overtly reliant on the low cost natural gas. It was estimated to generate Rs 16 to 18 billion during the last two quarters of the current fiscal year. However, the target is unlikely to be met due to extreme gas shortage during the last winter season.
The government was aiming to generate close to Rs 40 billion per annum from the cess to offer as collateral to the banks agreeing to finance estimated Rs 120 billion Iran Pakistan gas pipeline infrastructure and Rs 100 billion dedicated LNG transmission pipeline form Karachi port to power houses in Punjab.
Petroleum Minister Dr. Asim Hussain confirmed that they have sought imposition of the gas cess at the maximum limit as it was one of the options available to timely lay the much need gas pipeline infrastructure. He said the gas cess was not part of the finance bill and will be imposed after approval from the government. He said the government will be deciding to which limit the cess will be increased even though the ministry has recommended hiking it to maximum limited.
The minister said the increase was necessary to change the energy mix and to allow introduction of other fuels, as only hydrocarbons along could not meet the rising energy requirements. Coal and hydel must be exploited to generate more power from these resources.
When asked that Oil and Gas Regulatory Authority (OGRA) has determined a decrease in gas prices from July 1, 2012 what will be its impact on the cess. An infuriated minister termed OGRA a rudderless body trying to subvert the government’s attempts to change the energy mix.
The minister said he will be writing a complaint letter to the Prime Minister mentioning the flouting of the government’s policy decisions by the OGRA authorities. They are ruining the attempts of the government to put the sector in the right direction.