The Senate Standing Committee on Finance approved two bills on Thursday for the imposition of gas infrastructure development cess and petroleum levy on compressed natural gas (CNG) and liquefied natural gas (LPG). However, the committee barred collection of these levies from domestic sector consumers and general public, limiting its scope to the companies.
Money bills
The committee met under the chairmanship of Senator Ahmad Ali of MQM. It asked the government to prove whether the two bills were money bills or ordinary pieces of legislation. The matter was resolved after a covering letter from the Speaker National Assembly was produced before the committee, which was forwarded to the Senate along with the draft of the bills terming them money bills. Explaining the rationale for natural gas cess, Secretary Petroleum Ejaz Chaudhary explained that the gas development surcharge (GDS) went directly to the provinces and they did not spend a penny on infrastructure development. He said the gas cess will create space for the federal government to develop the infrastructure, as it will generate Rs35 billion per annum. Allying concerns of members that the cess will directly affect the public, Petroleum Minister Dr Asim Hussain assured it would be imposed only on companies and not domestic sector consumers as recommended by the committee.
Hands tied
Expressing skepticism, Senator Ishaq Dar of PML-N said historically cess has been a misused instrument, never serving the purpose it was employed for. If there were a genuine need to develop infrastructure, then Public Sector Development Programme should be utilised. He said the government was attempting to depress natural gas demand by increasing prices, which will further burden poor people with additional taxes of Rs35 billion per annum. The petroleum minister said the government’s hands were tied, as $1 billion were required for deploying a dedicated pipeline to transmit LNG from Karachi port to Lahore. Under the law, Sui gas companies get 17 per cent return on developing infrastructure, while a markup of 17 per cent will be payable on the loan procured, which will also impact the people, but cess will help counter this burden. Dar demanded a firm guarantee from the government, that the collected amount would be directed towards infrastructure development. He also asked for removal of other purposes from the bill. He feared that the amount generated from the cess would be passed to PEPCO on account of power subsidies. He demanded a separate account for the cess, as he did not want its fate like Rs 57 billion workers welfare fund (WWF).
Fertiliser subsidy
However, Finance Secretary Dr Waqar Masood Khan stressed retention of the clause and assured the cess would be used properly. Conceding that the government had utilised WWF funds, he said it was aware of its liabilities and was paying them. He said the power cess of Rs5 billion per annum was efficiently being used for the construction of Neelum Jhelum hydropower project. Senator Haroon Akhtar Khan said project cost has already increased manifold and would end up producing hydel power at the most expensive cost of $3.5 million per MW. He asked for ending subsidised gas to the fertiliser sector, which was receiving gas at $1.2 per mmBTU as compared to international price of $16 mmBTU. Dar said Rs28 billion could be collected only by increasing the gas tariff for fertiliser sector from Rs100 per mmBTU to Rs350 per mmBTU, even though it will still remain the lowest as compared to gas tariff of other sectors. The petroleum minister said cross subsidy to fertiliser sector could not be withdrawn immediately, but would be abolished gradually. Chairman Ahmad Ali said people are not ready to pay taxes, so the government is left with no other option. He said the government has committed that the tax will not be imposed on domestic sector consumers, and the bill should be passed. Dar said since the bill did not mention the prescribed tariff rate, it should include the complete tariff, as the committee would not provide blanket cover for tariff or extend open ended taxation powers to the government. The government assured compliance and the bill was approved. On the amendment in petroleum levy, the finance secretary said the government wants to retake power from the parliament to remove distortions in LPG and CNG sectors. Dr Asim said a few chosen people have held up opening of the LPG sector for competition. However, Dr Safdar Abassi of PPP questioned the move and asked him to explain how cartelisation was happening in the sector as 85 per cent of local LPG production controlled by three state owned companies. Dr Asim said influential people are hampering import of LPG, as they have a monopoly over the LPG marketing business. He said import of LPG was necessary to counter the energy crisis. The committee approved the bill with the dissenting note of Senator Safdar Abassi.
