According to a Business Recorder exclusive, the Ministry of Petroleum and Natural Resources has finalised a plan to collect 101 billion rupees from gas consumers for the construction of a South-North gas pipeline (Karachi to upcountry areas) for transport of imported RLNG from the port to the northern areas. Oil and Gas Regulatory Authority (Ogra) has, however, opposed this proposal on grounds that funding for the pipeline should be from the Gas Infrastructure Development Cess (GIDC), a dedicated fund set up for the purpose of developing gas-related infrastructure, rather than burdening the consumers with an additional surcharge.
Two elements need to be noted in this context. First, the budgeted GIDC revenue was estimated at 145 billion rupees in the current year's budget, with an identical amount budgeted and realised in fiscal year 2014-15. Second, the ongoing litigation against the cess was overcome through the May 2015 GIDC Act whereby the government in its Letter of Intent submitted to the International Monetary Fund under the 6.64 billion dollars Extended Fund Facility dated December 2015 claimed "the loss in cost recovery incurred by gas companies due to the delayed price notifications of FY2014/15 (due in July and January) was partially recuperated in the new tariff which was notified and implemented, in line with the Ogra determination, in August, 2015. The remaining revenue shortfall will be recuperated in the 2016 gas price notification. We will also make any necessary adjustments to notified prices to reflect imported gas prices, so that the cost of this gas will be fully reflected in the tariff on a monthly basis." This commitment by the government can indirectly be taken to reflect the proposal of the Petroleum Ministry given that the laying of the pipeline is a component of the cost of the delivery of imported RLNG from Karachi port to Lahore.
Business Recorder has supported the establishment of dedicated funds with the objective of only consumers of a particular commodity paying the cost of an improvement in infrastructure necessary for the delivery of the product. And this is in spite of legitimate concerns based on the actions of our finance ministers, including the incumbent, to appropriate dedicated funds to meet budget deficit targets.
However, at present, the falling international oil prices, with an associated impact on the price of other fuels, including gas, has reduced Pakistan's import bill for petroleum and products by around 40 percent. The finance ministry has used this saving to fund its growing current expenditure which rose from 2,611 billion rupees budgeted by the PPP-led coalition government in 2012-13 to 3,482 billion rupees budgeted for 2015-16. Defence accounted for a rise of 211 billion rupees leaving a 660 billion rupees higher allocation for non-defence-related expenditure belying the claims of the government that current expenditure rise is attributable mainly to the ongoing Aarb-e-Azb operation. The major rise was in interest payments on loans - from 925.7 billion rupees in the budgeted estimates of 2012-13 (the realised figure was not used because it does not include Dar's decision to eliminate the circular energy debt by borrowing about 400 billion rupee loans from the commercial banking sector) to 1279 billion rupees budgeted for the current year. And this rise is in spite of the fact that the IMF's EFF and repayment to the Paris consortium (including the IMF loan) will not begin till 2018.
This is indeed unfortunate and given the state of our infrastructure one would have hoped that savings due to a decline in the international price of oil were diverted towards development of deficient as well as degrading infrastructure in the country. At present, disturbingly, the Finance Ministry is using these savings to raise its revenue significantly, by levying higher taxes on petroleum and products while still reducing the price of oil as well as electricity, and funding non-development expenditure with no impact on growth or indeed in reversing the declining trend in our exports.