Pakistan News

ECC diverts development funds, eyes exit from power subsidies for industry

ECC diverts development funds, eyes exit from power subsidies for industry

ISLAMABAD: The government on Thursday “reallocated” from a major gas pipeline project about Rs15 billion for setting up of LPG air-mix plants in every district of the country a day after the Election Commission of Pakistan (ECP) imposed a ban on diversion of funds and recruitments so such diversions could not be used for political purposes.

The decision to divert the funds was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Prime Minister Shahid Khaqan Abbasi.




“The ECC approved a proposal for allowing Sui Southern Gas Company Limited (SSGC) to reallocate an amount of Rs14.8bn from RLNG-II pipeline project to LPG Air Mix Projects for their expeditious completion and to ensure uninterrupted supply of gas to household, industry etc”, said an official announcement adding the SSGCL was directed to expand setting up of air mix plants in every district of the country.

A senior government official told Dawn that the SSGCL board of directors would need to seek legal opinion as to how to spend funds approved by the ECC after the ban on diversion of development funds ahead of elections but would not slow down air-mix projects at any cost.

On April 11 (Wednesday), the ECP ordered that “all development schemes which have been approved with effect from April 1, 2018 like installation of gas pipelines, supply of electricity, roads’ carpeting, water supply schemes etc. shall not be executed by the federal/provincial/local governments’ authorities”.

Moreover, the federal government, the provincial governments and the local government shall not issue tenders of such schemes till conclusion of General Elections-2018, the ECP said adding that “diversion of funds already allocated to various development projects in the country is banned forthwith and the spending of funds so diverted shall stand frozen forthwith”.

A government official said the ECC had approved setting up of 30 LPG air mix plants each by SSGC and Sui Northern Gas Pipelines Limited (SNGPL) in October 2016. The SSGC completed three air mix plants but its board of directors expressed inability make available company funds for the remaining 27 plants at other district headquarters.

Tenders were floated for the 27 districts but bidders could not qualify and re-tendering is currently in process. Of them, 10 plants at Balochistan’s district headquarters were prioritized for expedited completion in 9-10 months i.e. until February 2019 where the provincial government had made available land. These include Uthal, Kharan, Khuzdar, Washuk, Loralai, Muslim Bagh, Killi Khanozai, Qilla Saifullah and Zhob.

He said the federal government asked the SSGC to finance these air mix plants from its own resources but the company and its board reported shortage of funds. It was, however, reported that about Rs14.8 billion from RLNG-II pipeline from Karachi to Lahore could be shifted to SSGC’s air mix plants.

The official said the RLNG-II project had been commissioned with Rs14bn saving, except for a 400-meter stretch disputed by a provincial minister. He said the ECC has now approved that funds saved from the pipeline be provided to air mix plants.

The ECC also considered the issue of power subsidy for the industrial sector and the payment of Industrial Subsidy Package claims and decided to constitute a committee to analyze impact and sustainability of the package.

It was also decided that retrospective recovery of Industrial Support Package (ISP) claims may be made, under mechanism proposed, if any, adjusted in tariff and subsequent claims of subsidy through the same policy directive.

In order to implement the decision, Finance Division was requested by Power Division for retrospective release of ISP claims till June 2017 because, if ISP claims are not released immediately, the sector is not in a position to continue the package for industry as announced by the Prime Minister.Finance Division, however, released only Rs12.640bn against the claims of Rs23.194bn after netting off of negative Fuel Price Adjustment (FPA) of corresponding month. The ministries of finance and power division proposed discontinuing the subsidy beyond December 2017.

In June 2017, the ECC had approved Rs3 per unit subsidy announced by then Prime Minister Nawaz Sharif for the industrial sector. At the time, it was decided that a mechanism in the form of policy directive to power regulator for inclusion in base tariff for the purpose of cross subsidy will be worked out for the subsidy beyond claims of June 2017.

Published in Dawn, April 13th, 2018

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