Gas subsidy for exporters to cost Rs41b

The subsidised gas supply to the five major exporting sectors is going to cost another Rs41 billion to the national exchequer

They have already received Rs31 billion worth of subsidy on gas consumption

The higher gas subsidy has put the entire liquefied natural gas (LNG) supply chain at risk

Now, the Petroleum Division is seeking approval of a supplementary grant of Rs72 billion to clear the subsidy bill of the export-focused sectors

These industries include textile including jute, carpets, leather, sports goods and surgical instruments

In addition, the Petroleum Division is asking for Rs11 billion in supplementary grant to cover the subsidy given to two fertiliser plants

In addition to the subsidy given to the exporting sectors, billions of rupees worth of subsidised gas is provided to two fertiliser plants in spite of alleged hoarding by the fertiliser industry

The government has revealed that the gas subsidy to exporting industries was being misused as those units, which were not exporting their products, were also receiving the subsidised gas

According to the submitted claims, the overdue subsidy stood at Rs31

335 billion up to November 2021, which included Rs7

63 billion carried over from FY21

The government has projected the estimated subsidy for December 2021 to June 2022 at Rs41 billion

Read Exporters to receive gas supply The Economic Coordination Committee (ECC) of the cabinet, in its meeting on August 16, 2021, considered a summary submitted by the Commerce Division for the continuation of concessionary rates of electricity and regasified LNG for the major export sectors

It approved the proposal that called for provision of RLNG at $6

5 per million British thermal units (mmbtu) to the exporting industries in financial year 2021-22

It said that the Finance Division may give a financial commitment that additional funds, if required, by the Power Division and Petroleum Division would be provided to continue the discounted energy rates for the exporters

However, the Ministry of Energy may apprise the relevant ministries of the budgetary situation in time so that the Commerce Division may place a summary for the allocation of a supplementary grant for the ECC’s consideration

Later, the federal cabinet, in its meeting held on November 9, 2021, reviewed a summary submitted by the Petroleum Division and approved a revision in the tariff of $6

5 per mmbtu for the captive power plants (self-power generation) of export sectors to $9 per unit for the period November 15, 2021 to March 31, 2022

Read PM directs fast-track licence issuance for domestic gas exploration However, the existing tariff of $6

5 per mmbtu would continue to be applied to the export sectors for gas/RLNG consumption in processing (general industrial use) only

The government had set a budget of Rs10 billion for the current financial year to meet the demand of Petroleum Division for the provision of subsidy to the export-oriented (zero-rated) industries

Two fertiliser manufacturing plants were receiving 70 million cubic feet per day (mmcfd) of RLNG at the subsidised rate of Rs805 per mmbtu whereas the notified RLNG tariff for December 2021 was $12

6238 (or Rs2,200) per unit

As per the ECC’s decision, these plants would operate till January 2022

The outstanding subsidy claim against RLNG supply for the period June-November 2021 was Rs10

963 billion

If these plants continue to operate through December 2021 and January 2022, an estimated subsidy of Rs6

445 billion will be required in addition to the arrears

The Ministry of Industries and Production has a budget of only Rs6 billion against the total subsidy requirement of Rs17

408 billion

It is important to highlight that Sui Northern Gas Pipelines Limited (SNGPL) purchases LNG from Pakistan State Oil and Pakistan LNG Limited, which procure the gas from international suppliers

Published in The Express Tribune, December 31st, 2021

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Date:01-Jan-2022 Reference:View Original Link