January 2016 NEWS COVERAGE PERIOD from JANUARY 25TH to JANURAY 31ST 2016 GOVT BURDENS GAS CONSUMERS with RS101BN to FINANCE PIPELINES Dawn, January 29Th, 2016
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January 2016 NEWS COVERAGE PERIOD FROM JANUARY 25TH TO JANURAY 31ST 2016 GOVT BURDENS GAS CONSUMERS WITH RS101BN TO FINANCE PIPELINES Dawn, January 29th, 2016 KHALEEQ KIANI ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Thursday decided to charge consumers of the two gas utilities Rs101 billion to partly finance pipeline network. At a charged meeting presided over by Finance Minister Ishaq Dar, the committee also approved Rs3 per unit reduction in future power tariff for industrial consumers previously announced by the prime minister in December. It also regularised import of first six cargoes of the liquefied natural gas (LNG) in April-May last year through a floating storage terminal, but deferred a final decision on LNG sales and purchase agreement between Qatargas and Pakistan State Oil (PSO) until Friday. “It was a bad day for member gas (Oil and Gas Regulatory Authority, or Ogra) Amir Naseem,” said a cabinet member who attended the meeting, adding that the finance minister lost his temper at the beginning of the meeting over Ogra’s written comments against petroleum ministry’s summary on Rs101bn financing arrangement for gas companies. Ogra earlier opposed the recovery of Rs101bn from consumers through tariff, saying the pipeline projects should be financed out of Gas Infrastructure Development Cess (GIDC) already being collected from consumers. The regulator believed that it could not allow under the GIDC law the “double taxation” through gas tariff. Consumers, who were already paying GIDC for pipeline infrastructure, could not be burdened again with financing for repayment of Rs101bn loan along with 17 per cent return on assets to be created by the gas companies through these loans. This was enough to ignite Mr Dar’s ire. “Where should we bring this money from? Why don’t you charge them (consumers),” said the finance minister after reading Ogra’s written opinion. “It’s government prerogative to decide from where to raise money and where to spend,” he was quoted as saying. He then asked the Ogra member to come close to him and show where in the GIDC law it was written the money would be spent on LNG pipelines and consumers could not be charged for it. Mr Naseem had to leave his seat to move to the ECC chairman and read with him various relevant clauses to prove his point. The finance minister, still dissatisfied, then remarked: “You people also live in Pakistan and should also understand how we should move on. Don’t do this.” The Ogra member told the ECC that the regulator could not allow double charges for the same purpose under the law but if the government issued policy guidelines it would have to implement them. The finance minister then decided to issue policy guidelines. He believed that the projects like pipelines under Turkmenistan, Afghanistan, Pakistan and India (TAPI), Iran-Pakistan and Karachi to Lahore and Gwadar to Nawabshah for transportation of LNG and natural gas required Rs600bn and the government had so far collected around Rs200bn only. Under the federal budget, the government is to collect Rs145bn through GIDC on gas sales during the current fiscal year. The government had given undertakings to parliament and the courts that the tax (GIDC) would be used to construct gas pipeline network. The GIDC is being collected from various consumer categories — except residential consumers — for more than five years now with the sole objective of arranging funds for gas pipeline infrastructure to facilitate utilisation of imported gases from LNG and proposed pipelines from Turkmenistan and Iran. The petroleum ministry demanded collection of Rs101bn from consumers so that the gas companies could construct pipelines to transmit imported LNG from ports to power load centres in Punjab. The petroleum ministry has also requested the ECC to allow the two gas companies to claim return on investment planned to be made on pipelines with this additional expenditure. The ministry said the ECC approved in September 2015 the bank borrowing of Rs101bn from commercial banks to SNGPL and SSCGL to carry out augmentation of pipelines for phase two of the upcoming LNG and anticipated indigenous supplies against the government’s guarantees to be provided by the Ministry of Finance but was being disallowed in tariff by Ogra. The petroleum ministry reported that financial arrangements were prerequisite to complete RLNG project of national importance, in the absence of which the companies could not be able to proceed further, delaying the project implementation. The ECC directed a committee comprising secretaries of finance, law and petroleum to submit a revised summary on Friday for the clearance of $15bn LNG supply agreement between Qatargas and PSO for 15 years. Barrister Zafarullah Khan, prime minister’s special assistant on human rights, was also asked to help the committee address legal challenges, including change in Ogra rules, higher port charges build-up in tariff, etc. To implement an announcement made by the prime minister last month, the ECC also decided to issue policy guidelines to National Electric Power Regulatory Authority (Nepra) for a Rs3 per unit cut in existing power tariff for the Industrial consumers of all distributions companies (Discos) for 2015-16, for units consumed from Jan 1, 2016 onwards. The ECC on a proposal submitted by the Ministry of Petroleum and Natural Resources gave ex-post facto approval in respect of six cargoes arranged by PSO from Qatargas under a government-to-government arrangement on a FOB (free on board) basis using FSRU (floating storage and regasification unit) as LNG carrier. Meanwhile, APP reported that the chair gave instructions to reconvene ECC meeting on Friday (today) to consider important leftover agenda items including provision of salaries to the Pakistan Steel Mills and supply of wheat to the displaced people through the World Food Programme. http://www.dawn.com/news/1236026/govt-burdens-gas-consumers-with-rs101bn-to-finance-pipelines TOTAL REVAMP: K-P GOVERNMENT ALL SET TO RESTRUCTURE PEDO The Express Tribune, January 29th, 2016 Sohail Khattak PESHAWAR: In another show of institutional reforms, the energy and power department is set to restructure and overhaul the Pakhtunkhwa Energy Development Organization (PEDO). A summary of the proposed changes in the organisational structure was sent to the chief minister for approval and insiders say it is just a matter of weeks. The move irked employees of PEDO who are unhappy with the proposed structure, calling it “privatisation and a waste of money”. The powers that be in the department are committed to implement the summary once it gets approval from the chief minister. Senior officials believe the department needs competent people from the market to come forth and grab financing for the execution of provincial projects in the hydel sector. “We need large sums of money to execute our projects and the pace of PEDO has not met our requirements or the energy needs of the country,” said a senior official of the department, requesting anonymity. The department’s apex committee held a meeting in June 2015 and approved a plan under which Khyber- Pakhtunkhwa Power Company Limited would be formed in place of PEDO alongside special purpose vehicles (SPV)—private companies—to execute and operate hydel power projects. According to a copy of the summary sent to the chief minister, the KPPCL would be incorporated with the Security and Exchange Commission of Pakistan (SECP) under the Companies Ordinance 1984. The company will have an authorised capital of Rs5 billion and paid up capital of Rs2.5 billion. The fee of the SECP and paid up capital would be provided from the Hydel Development Fund (HDF) after getting approval from the fund’s board. The department has 12 hydropower projects—Malakand-III, Pehur, Reshun, Shishi, Machai, Ranolia, Daral Khwar, Koto, Jabori, Karora, Lawi and Matiltan. Under the new set-up, each project will become a separate power company and KPPCL will own equity in each of the SPVs on behalf of the K-P government. The authorised capital for each SPV would be Rs3 billion and paid up capital will be a function of project costs. According to summary documents, operational projects included Malakand-III, Pehur, Reshun and Shishi which require no further cash injection. Funds for the remaining would be allocated in the Annual Development Programme (ADP) and HDF could be used for the purpose. The KPPCL will have a chief executive officer (CEO) as will each SPV, said an insider at the PEDO union. He and his peers are against the change and the hefty salaries proposed for the CEOs and other staffers of the companies. “The CEO will get Rs1.4 million every month, while the human resource manager will get Rs0.7 million. Similar salaries have been offered for other staffers,” he said. “This means the profit which PEDO currently generates for the provincial government will be spent on salaries,” said employee union president Fazli Rahim Khan. Fazli Rahim said PEDO currently generated Rs3 billion annually for the K-P government through 105 megawatts of power generation. However, the province has a generation capacity of 3,500 megawatts. “It is a one-time investment and then profit for a lifetime,” said Fazli Rahim. He alleged central leaders of the ruling Pakistan Tehreek-e-Insaf (PTI) were eying jobs for their own people to make some money. However, a senior official at the department rejected the union’s reservations. “This is not privatisation, just restructuring which is needed because we require financing to execute these projects.” The official added they would pick up competent people from the market at good salaries who would find financing for the projects as HDF can only meet the monetary needs of a single initiative.