Recovery of Rs115bn from gas consumers okayed

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Wednesday remained upset over the wheat situation amid vague signals from the authorities concerned and continuously increasing flour prices in the market.

A meeting of the ECC presided over by Adviser to the Prime Minister on Finance and Revenue Dr Hafeez Shaikh, however, allowed recovery of about Rs115 billion through re-gasified liquefied natural gas (RLNG) tariff in a staggered manner to meet the revenue shortfall of Sui Northern Gas Pipelines Limited (SNGPL), including Rs74bn past receivables.

The meeting directed the Oil and Gas Regulatory Authority (Ogra) to issue new CNG (compressed natural gas) licences to RLNG-based CNG stations with the provision that the licensee would neither receive indigenous gas nor can claim for its conversion to indigenous gas. The ban on the issuance of new licences was imposed in 2008.

An ECC participant told Dawn that the committee members expressed serious reservations over the handling of wheat imports, presentation of unauthentic data on demand-supply situation and pricing statistics by the officials of the Ministry of National Food Security and Research (MNFSR) that was causing anxiety among the masses and earning bad name to the government.

ECC allows Ogra to issue new CNG licences; cabinet members assail food ministry over handling of wheat imports, unauthentic demand-supply data and pricing statistics

Informed sources said that those criticising the MNFSR included Dr Shaikh himself, Planning and Development Minister Asad Umar, Adviser to the PM on Commerce Razak Dawood, Power Minister Omar Ayub Khan and Special Assistant to the PM on Petroleum Nadeem Babar. Minister for National Food Security and Research Syed Fakhar Imam also did not support the officials of his ministry.

The ECC members were concerned about the decision-making approach of the MNFSR and asked if the cabinet forum was being taken for a ride. Questions were also raised as to why the import orders of the Trading Corporation of Pakistan (TCP) at $274 per tonne got scrapped and then only a few days later purchases of Russian wheat were being made at $279 per tonne.

The MNFSR reported that the latest TCP tender for 330,000 tonnes opened on Oct 5 had attracted lowest price of $278.5 per tonne for Russian wheat and worked out at Rs49,450 per tonne or Rs1,978 per 40kg. Also, the import of 180,000 tonnes of wheat from Russia on a government-to-government (G2G) basis had been availed at $279 per tonne.

The ministry also reported that Russia had offered 1.17 million tonnes of additional wheat at “highly concessional rates” and demanded that the TCP and Pakistan Agricultural Storage and Services Corporation (Passco) be appointed to procure 750,000 tonnes and 420,000 tonnes, respectively, for supply in January 2021.

A couple of cabinet members asked questions about the ‘highly concessional rates’ for additional quantities but were unable to know the rate per se.

It was highlighted that at the time of cancellation of $274 per tonne tender, the MNFSR had claimed discounted imports from Russia and then disclosed the rate in less than 12 hours of notice before the expiry of the memorandum of understanding with Russia.

One of the senior ministers reported that wheat flour was being sold at Rs1,400 and above per 20kg in the market and figures about wheat availability and supply were unreliable and hence had an impact on the decision-making and reputation of the government.

Dr Shaikh observed that the MNFSR appeared to be setting prices for the market without realising as to what price the commodity would be available and affordable to the common man.

Another minister wanted a detailed explanation about the quality of Russian wheat and if it suited taste of Pakistani consumers.

MNFSR Secretary Omar Hameed Khan reported that Russia was sitting on a stockpile of about 40 million tonnes of surplus wheat, but it appeared unclear what concession was on offer.

A cabinet member said it was reasonably evident that import of about 1.9 million tonnes of wheat — 840,000 tonnes in public sector and about one million tonnes in private sector — had been confirmed until December and hence the stocks were in comfortable position. A review would have to be made next month for future requirements, he added.

The MNFSR secretary did not respond to Dawn request for comment on the wheat situation.

According to an official statement, the ECC constituted a three-member committee comprising the secretaries of finance, commerce and national food security to negotiate the wheat price with the Russian government for further procurement.

The ECC decided that 330,000 tonnes of wheat when imported by the TCP would be distributed equally between Passco, Punjab and Khyber Pakhtunkhwa.

It allowed the recovery by SNGPL of previous revenue shortfall as well as enabling the company to manage the load of domestic/commercial sectors by diversion of RLNG in the approaching winter. The meeting was informed that the outstanding recoverable amount against previous LNG injections into the distribution network for residential and commercial consumers stood at Rs74bn which would increase by Rs40bn to about Rs115bn after upcoming winter months unless a mechanism for recovery was put in place.

RLNG and indigenous gas pricing was ring-fenced but the sale of RLNG had been provided by SNGPL to the domestic and commercial consumers in winter months under political compulsions. The cost difference between the two — local gas and RLNG — had developed an unrecovered expenditure of Rs73.85bn between July 2018 and April 2020 as the expensive LNG (Rs1,450 to Rs1,800 per unit) was provided on the instructions of the government to domestic consumers 91 percent of whom were using gas at the rate of Rs121 per unit.

It was also noted that export sectors, fertiliser and domestic sectors were already on subsidised rates and, therefore, the additional burden would shift to general industry, CNG and power plants where it would translate into electricity tariff.

A cabinet member, however, said the rates for LNG consumers would not increase as it would be offset by cheaper imports at present and some other adjustments.

The ECC directed Ogra to verify the actual quantities of LNG diverted to the domestic consumers and allow a gradual recovery to SNGPL.

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