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ECC takes up fertiliser subsidy, gas price hike issues today

ECC takes up fertiliser subsidy, gas price hike issues today

ISLAMABAD: Amid criticism from the opposition PML-N, the Economic Coor­dination Committee (ECC) of the cabinet will take up for a decision on Monday (today) two of the most politically sensitive economic issues — subsidy for import and domestic production of fertiliser and 30 to 186 per cent increase in gas prices.

To be presided over by Finance Minister Asad Umer, the ECC meeting is expected to consider only two summaries, according to the agenda circulated among the members. The two subjects have been on the agenda of all the three meetings of the ECC since it was reconstituted on Aug 26.

In those meetings, the finance minister had set for himself the target to ensure that Rs14 billion windfalls earned by fertiliser industry through subsidised export of the commodity last season returned to the economy.

Sources said the timing of the decision on urea import was the most important thing because upcoming Rabi season (2018-19) has been estimated to face a 316,000 tonnes of shortage and the cropping season begins on October 1 and the import process in the public sector can hardly be completed in two months. Among other crops, wheat is the major and most crucial crop of the season being the staple food.

Meeting to be chaired by Asad Umer likely to discuss only two summaries

Therefore, more important to the decision-making on fertiliser will be its integrity given the background of both Mr Asad Umer and Abdul Razzaq Dawood, the prime minister’s adviser on commerce, industries and production, as the fertiliser shortage could trigger price hike and black marketing if not handled carefully.

An official said the two have engaged with the industry in the recent days. It is estimated that when run on full capacity, three fertiliser units — Pak-Arab, Agritech and Dawood Hercules — can together produce 87,000 tonnes per month or 260,000 tonnes in three months when the commodity is required the most by wheat crop.

That would leave a shortfall of about 60,000 tonnes or up to 100,000 tonnes of import if some cushion is also taken into account. If run on 28pc liquefied natural gas and 72pc on domestic gas as has been the practice, the industry requires a subsidy of Rs2.95bn for two months.

But the fertiliser review committee under the leadership of Mr Dawood has proposed all the three plants be run on RLNG on a 50pc cost sharing basis by the fertiliser plants and the government. The ECC would decide the quantum of subsidy required for running domestic plants and on the import of remaining quantity of 60,000 to 100,000 tonnes, as the case may be and how the import process be minimised while remaining within the procurement rules.

Secondly, the ECC would also decide how to implement an average 46pc gas price increase determined by the regulator to keep the two gas utilities afloat. The government has the powers under the law to switch price increase among various consumer groups and slabs without changing the overall 46pc increase.

The summary moved by the petroleum division on gas prices on the basis of Ogra’s determination has proposed 186pc increase in the price for the two lowest domestic consumer slabs. It has proposed the price of first 100 cubic meters per month be increased from Rs110 to Rs315 per MMBTU (million British Thermal Unit) and from Rs220 to Rs629 per MMBTU for up to 300 cubic meters per month.

For the third domestic slab above 300 cubic meters, fertiliser fuel, general industry and captive industry, the summary has worked out 30pc increase from Rs600 per MMBTU to Rs780. For old fertiliser, the rates have been proposed to go up by 30pc from Rs123 to Rs160 per MMBTU.

The tariff for power plants has also been worked to go up by 30pc from Rs400 to Rs520 per MMBTU while rates for cement plants have been proposed at Rs975 per unit, instead of Rs750. The rates for CNG and commercial consumers have also been proposed to go up by 30pc to Rs911 per MMBTU, instead of Rs700 per unit.

The petroleum division said the regulator had worked out 30pc increase in gas sale rates for all consumers except domestic sector where an increase of 186pc had been proposed. Even with this increase, the proposed tariff depicts 50pc cost recovery for first slab and 100pc of second slab.

Interestingly, the increase in gas rates for the SSGC are proposed relatively on the lower side — between 14 and 168pc — but given the government policy of uniform gas rates across the country, the SNGPL rates of 30 to 186pc have to be followed, according to the petroleum division’s summary.

Published in Dawn, September 10th, 2018

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