Planning division says export sector should not be given gas subsidies

The Planning Division informed the Ministry of Energy that the export-oriented sector was already receiving gas and electricity at discounted rates and therefore, subsidy on supply of gas should be abolished.

The Planning Division has asked the government to abolish subsidy on supply of gas to the export-oriented sector, which is already availing subsidy on the provision of gas and electricity.

It is worth mentioning that the Cabinet Committee on Energy (CCOE) has recently approved another package worth Rs26 billion for the industry.

Ministry of Energy was made aware of the fact that the export-oriented sector was already receiving gas and electricity at discounted rates and therefore, subsidy on supply of gas should be abolished.

According to the national news agency, Tribune, the Petroleum Division also proposed that only the export-oriented industry should avail subsidy on gas supply. In an effort to boost exports in the sector, the textile industry has not only been given the gas subsidy but the electricity tariffs are slashed for incentivizing exports.

In its reports, IMF has time and again mentioned the regressive nature of such subsidies that do not impact the country’s development in the long run and lead to further inequalities in the society.

Read More: ECC approves revised subsidy structure and eligibility for NPHP

The ECC had also directed to supply 100% of the LNG to the export-oriented sector for the three months ranging from December to February. Due to a shortage of indigenous gas during March 2020, SNGPL had supplied 100% RLNG for which SNGPL had raised a subsidy claim by Rs4 billion.

However, this 100% dedicated supply of RLNG is against the policy made by the ECC, thus ECC approval would have been required according to the SOPs.

According to ECC policy, the gas supply to the textile, carpets, leather sports and surgical goods industry would be divided in the ratio of 50:50 among LNG and the domestic gas supply.

According to tribune the weighted average gas tariff of such according to ECC policy shall be $6.5 per MMBtu. Gas prices for similar consumers of Sui Southern Gas Company (SSGC) and those of SNGPL in Khyber-Pakhtunkhwa will remain unchanged.

Reportedly, ECC decided that 100% RLNG shall be provided to the zero-rated industry for three months from December to February. A blend of system gas and RLNG at 50:50 shall be provided to the zero-rated industry for a period of nine months – March to November.

Now, the cabinet body on energy had extended the package on electricity that was set to expire on April 30, 2021, which will cost Rs26 billion to the national exchequer.

The Power Division had sought approval of the energy committee for allocation of a budget subsidy of Rs26 billion for industrial consumers from May 1, 2021, to June 30, 2022, due to the extension in the tariff scheme.

Read More: Energy minister asked to raise gas prices

Even though the discounted gas supply scheme was for the exporters, according to media reports, the Petroleum Ministry claims that even the non-exporters in the textile sector were availing the subsidy.

During a meeting held last Thursday, the newly-appointed Energy Minister Hammad Azhar was also informed that gas companies like Sui Northern Gas Pipelines (SNGPL), Pakistan LNG Limited (PLL), and Pakistan State Oil (PSO) were moving towards a financial collapse owing to the circular debt which had inflated due to the transfer of expensive LNG gas towards the domestic sector.


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