ISLAMABAD                  -              The government is considering a proposal to make the Inter State Gas System (ISGS) as an autonomous body keeping in view the significance and strategic nature of the projects being undertaken by the company. The office of the Advisor to the Prime Minister on Institutional Reforms has planned to retain ISGS an autonomous body on account of the significance and strategic nature of the projects being undertaken by it,” official documents available with The Nation reveals. As per the proposal, the ISGS will perform functions entrusted to it by the Government of Pakistan (GoP) but distinct from the Executive Department which are under the direct control of the GoP. To work as an autonomous body, ISGS will require a reliable funding arrangement till the completion of some of the gas pipeline projects currently under progress, said the document,

Since its inception 23 years ago, the ISGS has failed to establish a single independent source of revenue and had requested the government to extend the loan facility provided to it in 2015.

In its summary to the ECC, the Petroleum Division informed that ISGS was established in 1996 as a private limited company and was a joint venture between SSGCL and SNGPL with a shareholding of 51 percent and 49 percent respectively. The establishment expenditure of ISGS was reimbursed by both the gas utilities company and to meet its Estimated Revenue Requirements (ERR), OGRA had allowed the companies to pass on it to the gas consumers as a part of tariff. In the FY 2015-16 Ogra disallowed the inclusion of ISGS’s establishment in determination of ERR to the sui companies based on the fact that GHPL had acquired majority equity stakes in the company as a result of the subscription agreement. In December 2016, the ECC directed GHPL to fund all the project activities of ISGS in the form of a medium term loan and GHPL be tasked to continue funding all project activities of ISGSL as a 100 percent subsidiary company therefore all government investments (e.g. from GIDC) in projects being undertaken by ISGSL shall be routed thorough GHPL; SSGCL and SNGPL shall transfer their shares in ISGSL to GHPL at face value. GHPL being parent company will give a three years term loan to fund all its expenditure on all government mandated projects being undertaken by ISGSL. This loan and related interest will be repayable after three years through a single bullet repayment on the terms separately agreed between GHPL and ISGSL through a loan Agreement.

Petroleum Division further informed that the above arrangement was intended as a stop gap arrangement as projects of ISGS were expected to materialize in that timeframe. The GIDC charged to the gas consumers over and above the gas price was also intended to be utilized for the development of infrastructure projects being undertaken by ISGS. Despite the fact that has been a significant fund collection of GIDC, no funds have yet been released to date for these earmarked projects. Moreover the cessation of Gwadar Nawbshah LNG terminal and Pipeline Project activities and re-assignment of Machike-Tarujabba Oil Pipeline project to the private sector ISGS’s aim to be self reliant and to guarantee an independent source of revenue have severely hampered. It was informed that the ISGS has no revenue, to repay the loan amount and interest on the expiry of loan agreement. Therefore an extension in the loan arrangement and continuation of funding for a period of two years is indispensible.

Pakistan has already signed the Head of Terms of Host Government Agreement for TAPI project. Ogra has issued construction and operation license to ISGS for the project. Similarly progress on North South Gas Pipeline Project is also underway. Both TAPI and North-South projects are anticipated for completion in 2022-23. Each of the current pipeline projects need to reach maturity within two years or will become redundant if not completed within two years.

GHPL be tasked to continue funding all project activities of ISGSL as a 100 percent subsidiary company therefore all government investments(e.g. from GIDC) in projects being undertaken by ISGSL shall be routed thorough GHPL and the loan agreement between ISGS and GHPL is amended to extend the term of the loan for a period of further two years.

 There will be stipulation in the agreement that (a) any extension thereafter be subject to complete review of all projects and business plan and as soon as the first project reaches closure, ISGS needs to become financially self sustaining and upon meeting condition it should put forward a business plan as how it will return loan.

The ECC has constituted a committee comprising Special Assistant to Prime Minister on Petroleum(Convener) and Secretary finance division to evolve a viable plan for rationalization of operating/administrative expenses of ISGS. The committee will also outline the future business plan and debt repayment strategy of the company and will submit it report to the ECC.