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New gas pricing mechanism: Sindh up to move apex court against Centre

New gas pricing mechanism: Sindh up to move apex court against Centre

KARACHI: Sindh Chief Minister Syed Qaim Ali Shah while presiding over a high level meeting directed the officials concerned to challenge the federal government’s decision regarding introduction of new pricing mechanism for natural gas in the Supreme Court.

It is to be noted that the Economic Coordination Committee (ECC) of the federal cabinet had approved a pricing mechanism for gas under which unaccounted for gas (UFG) will be raise from current 4.5 percent to 9 percent to shift burden of gas theft to consumers.

The Sindh CM directed the officials concerned to approach the Supreme Court after consulting eminent lawyers and Advocate General of Sindh immediately.

During the meeting Sindh Finance and Energy Minister Syed Murad Ali Shah informed that the ECC, without consulting the Sindh government, had decided to increase volume permissible under UFG (gas lost due to leakages/theft) from 4.5 per cent to 9 percent, even though the matter fell under jurisdiction of the Council of Common Interests after devolution of powers under the 18th Amendment.

He said the step would cause huge financial losses to Sindh if the federal government did not increase the consumer price of gas proportionately.

Similarly, he said, the federal government had decided to dismantle the gas pricing agreement of the Mari Petroleum Company Ltd and replace it with a market-related formula.

Previously, the minister said, the federal government had been bearing all the expenses of the company and getting gas at its production cost of $0.73 per MMBTU and after linking it with crude oil the production cost of its gas had been increased to $1.87 with sale price fixed at Rs187 per MMBTU.

The change in pricing mechanism would eat up Sindh government’s revenue at the rate of Rs64 per MMBTU, he said.

He also talked about Sindh government’s claim of its due share from the amount collected by the federal government under the Gas Infrastructure Development Cess (GIDC).

The federal government had been collecting the money on the pretext that it would be utilised on the Pak-Iran gas pipeline project, but later the Khyber Pakhtunkhwa government challenged it in the Peshawar High Court which declared it illegal. The apex court upheld the PHC decision.

The minister said the federal government had so far collected between Rs100 billion and Rs135 billion as GIDC. The cess had been charged from consumers, not the companies, and the provinces had a right to get their shares from it, he added.