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Home / Business / Govt takes back 33pc cut in gas prices for industry

Govt takes back 33pc cut in gas prices for industry


ISLAMABAD: The government on Thursday reversed its decision of November 25 to reduce gas prices for the industrial sector by 33 per cent following a strong protest from the Punjab government and Punjab-based textile industry.

Instead, the reduction in gas rates has now been diverted to the power generation sector — including public-sector power plants and independent power producers (IPPs) — to give some relief to the textile industry in Punjab.

On Nov 25, the Economic Coordination Committee (ECC) of the Cabinet led by Finance Minister Ishaq Dar approved the reduction in the gas price for all industries from Rs600 per million British thermal units (mmBtu) to Rs400 per mmBtu to pass on the benefit of the drop in the Brent crude price in the international market.

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Soon after the announcement last month, the textile industry in Punjab took up the issue with Chief Minister Shahbaz Sharif, saying the industrial sector in the province was purchasing imported liquefied natural gas (LNG) at Rs932 per mmBtu because of the non-availability of domestic gas.

It was pointed out that industries in Sindh and Khyber Pakhtunkhwa, which were already purchasing natural gas at a relatively

lower rate of Rs600 per mmBtu, would now get a relief of another Rs200 per mmBtu to the competitive disadvantage of Punjab’s industry.

As a result of the agitation, no notification was issued regarding the price cut approved by the ECC and a new summary was prepared on the instructions of the PML-N leadership to reverse the decision.

An official statement said the decision was reversed because “the differential in the cost of production of industrial customers on the SNGPL system versus SSGC customers widened, which was agitated by the industrial consumers on the SNGPL system who sought level playing field”.

The Ministry of Petroleum and Natural Resources (MPNR) requested ECC for the withdrawal of its earlier decision.

Since the cushion in the gas price was actually available, the government decided to reduce the gas sale price for power stations and IPPs from Rs613 per mmBtu to Rs400 per mmBtu and set the rate of the General Sales Tax at Rs100 per mmBtu on the gas sale to power plants.

The ministry said the revised decision will result in not only the elimination of the price disparity to a large extent but also reduce the electricity generation cost.

ECC also approved the disbursement of salaries of one and a half months to Pakistan Steel employees. The Privatisation Division sought the approval of Rs570 million for the payment of 50pc remaining salary for August amounting to Rs190m and Rs380m for September.

ECC also approved funding for Inter-State Gas Systems (Private) Limited (ISGSL) subject to the completion of corporate formalities. The MPNR proposed that Government Holding (Private) Limited (GHPL), being is parent company, should give a three-year term loan to ISGSL to fund the expenditure on all government-mandated projects.

This loan and related interest will be payable after three years as a single-bullet payment on terms separately agreed between GHPL and ISGSL through a loan agreement.

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