Islamabad - Sindh government has asked the federal government for upward revision of gas prices as the province is losing billion of rupees annually under Gas Development Surcharge (GDS) due to old sale prices and increased prescribed gas price, it is learnt reliably.
Official sources told The Nation that the Sindh share in Gas Development Surcharge was less than the other provinces because of the uncapping of Mari Petroleum Company Limited (MPCL) share by dismantling the Gas Price Agreement (GPA) with the company and the provision of subsidized gas to Angro Fertilizer is costing billions of rupees annually to the province. The levy of proposed Gas Infrastructure Development Cess (GIDC) will further hurt the provincial receipt.
A letter in this regard, sent by the Sindh Energy department to the Ministry of Petroleum and Natural Resources, said that ironically “the Ministry is telling us that the concessional gas supply to Angro Fertilizer from Mari Petroleum Company Limited have no impact on generation of GDS on SNGPL system, on the contrary it is the MPCL dedicated well supply system which has borne the brunt of loss in GDS and the not the SNGPL.
Mari dedicated gas wells are the main source of generation of GDS and allocation/diversion of gas at concessional rates to Engro’s new plant from Mari wells, depriving province of an equivalent share in GDS which was to be generated had it continuously supplied gas to old plant, the letter added.
After the dismantling of Mari GPA, the Federal government has not yet proposed any upward revision of sale price of gas to its dedicated consumers, so resultantly because of the same old sale price and increased prescribed price the GDS must have adversely affected, automatically causing huge financial losses to provincial receipts, the letter said.
The Sindh government was informed by the federal government that since 2013 the gas utilities companies are generating negative GDS owing to non revision of category wise gas sale price, the letter said. Adding that it is beyond comprehension that the ministry of Petroleum and Natural Resources while issuing detailed guidelines to utility companies, had not safe guarded the provincial interest.
Earlier according the Mari GPA the profit was capped but now under a new formula the company profit has been uncapped which is hurting the Sindh revenue, the source explained.
Giving the details the source said that according the KP formula of gas price the wellhead price of gas is $ 4 and the expenses are about $ 0.25 which takes the prescribed price to about $ 4.25, while the sale price is $ 6 per MBTU, the GDS is a differential margin of gas sale prices and prescribed prices. The KP share of GDS is $ 1.75. While in Sindh the wellhead price of Mari gas is about $ 4.35(which is changing with international price change) and expenses are $ 0.25, which takes the prescribed price is $4.60 and with the sale price of $ 6, $ 1.40 goes to Sindh.
The levying of $ 0.50 per MBTU Gas Infrastructure Development Cess (GIDC) will further reduce the province share in GDS, means the province will receive only $0.9 GDS per MBTU of the government implemented its decision regarding GIDC, the sources informed.
According the Sindh’s stand the provision of natural gas to Engro Fertilizer at concessional rates has caused financial loss of Rs4-5 billion annually in Gas Development Surcharge (GDS).
According the Sindh claim, the dismantling of Mari’s GPA has caused huge financial loss to Sindh government, as Mari was a major contributor in gas development surcharge. It is feared government of Sindh may lose around Rs 8 billion to Rs 10 billion annually.