CENTRE, SINDH OWE GAS SURCHARGE TO BALOCHISTAN

SYED FAZL-E-HAIDER
Mar 31 - Apr 06, 2008

While Balochistan has been facing serious financial problems, it could not get its outstanding dues against centre and the Sindh. The province has billions of rupees outstanding against federal and Sindh governments. The gas surcharge dues include Rs128 billion owed by the federal government and Rs23 billion by the Sindh government. The provincial governor has reportedly asked the provincial government to take up with the federal government the matter of outstanding Rs150 billion gas surcharge owed by the federal and Sindh governments.

Gas development surcharge (GDS) is the only major source of income for the province. Balochistan's case for a fair share in GDS had gone by default, as the former provincial Chief Minister had not raised the issue at the meeting of the Council of Common Interest (CCI). The present division of revenue from GDS is unjust and unfair. Balochistan's position is that investment at Sui in Bugti tribal area was made in 1952 and at that time, the investment was not as high as it is now in Sindh and Punjab. The differences between the average well head cost and average sale price of Sui gas should be the highest. Similarly, the province's share in the gas revenue should also be highest.

Balochistan wants a greater share in gas revenue from the Sui Southern Gas distribution system on the plea that its well-head cost is almost zero, as the investment was made more than 50 years ago. At present, the wellhead price of gas produced by Sui is Rs51 MMMBTU and that of Loti and Pir Koh gas is Rs80.90 MMMBTU. The maximum and minimum sale prices of gas from Balochistan are Rs189.6 and 248.18 MMMBTU. If the revenue or energy generated from the Uch gas fields, which exclusively serve the Uch power plant, was taken into account, the GDS should go up to around Rs16 billion a year.

According to an estimate, the GDS revenue payable by the Sui Northern Gas Pipeline Limited (SNGPL) from Sui (on the basis of well-head prices) alone is around Rs11.6 billion and from Loti and Pir Koh gas fields is about Rs1.334 billion, a total of Rs12.927 billion. But the revenue supposed to be paid to the government of Balochistan from the Sui Southern Gas Company Limited from Sui wells is around Rs1.72 billion.

The GDS is mainly recovered from cement and energy sectors. Balochistan, for having users of its gas in the NWFP and Punjab, suffers losses in gas revenue for two reasons:

1- GDS exemption to the domestic consumers in Punjab and NWFP

2- Higher transmission and distribution cost for longer distance

Another important grievance of the province has been against the unending profiteering of the gas distribution companies. The total revenue for the province should be around Rs14.647 billion keeping in view the well-head prices of the three wells - Sui, Pir Koh and Loti. According to an estimate, the GDS revenue payable by the Sui Northern Gas Pipeline Limited (SNGPL) from Sui (on the basis of well-head prices) alone is around Rs11.6 billion and from Loti and Pir Koh gas fields it is about Rs1.334 billion, a total of Rs12.927 billion. However, the revenue supposed to be paid to the government of Balochistan from the Sui Southern Gas Company Limited from Sui wells is around Rs1.72 billion.

Balochistan is getting merely Rs 22 per thousands cubic feet while Sindh is getting Rs 126 and Punjab Rs 180 for some of the well. There has been a demand for increase in the wellhead price of the gas in Balochistan at par with the Sindh and the Punjab. The issue needs to be resolved politically not only to ensure uninterrupted supply of energy but to facilitate exploration and exploitation of new oil and gas reserves in the province.

The province's share in the gas development surcharge, excise duty and royalty in the fiscal year 1996-97 was 36 per cent which in 1995-96 was 50 per cent. The federal government grants together with the federal excise on gas and the provincial royalty, used to make up from 70-80 per cent of the provincial revenue budget before the NFC Award of 1991. Under National Finance Commission Award of 1991, this income was divisible among the provinces. The province witnessed a serious shortfall of revenue receipts from Federal Government on the head of natural gas revenue. Balochistan received Rs.17 billion during FY 2003-04, same as in FY 2002-03, while there was an increase of 11 percent revenue of Federal and three provincial governments under this head. The revenue from natural gas would be going down with the passage of time as Balochistan found no new wells and Province's share in transmission of natural gas is shrinking as more wells were found in other provinces.

Balochistan has been deprived of its due share in terms of royalty, gas use and economic benefits. And the genesis of the problem is political. The province witnessed a serious shortfall of revenue receipts from Federal Government on the head of natural gas revenue. The federal government realizing the pressing financial needs of the province must immediately pay heed to its legitimate share in GDS.

It is worth mentioning that the inter-provincial committee under Senator Dilawar Abbas had recommended a formula for an increase in Balochistan's share of the gas development surcharge and royalty but that had not been implemented. The formula for sharing of GDS equally by the provinces producing gas had received universal acceptance, but it has remained confined to official documents.

Though Balochistan has no sound industrial base, yet it goes to the credit of this province that it brought about an industrial revolution in the country through its energy resources. The Sui Gas Field is still the single largest and the pioneer gas-producing field in the country. Since its discovery, Sui gas has been a source of energy for industry, power generation, agriculture, commerce and household needs. It is also used as feedstock for manufacture of fertilizers and other chemicals.

All the other three provinces owe their industrial development and economic progress to Sui gas field in Balochistan. It is the time to compensate the province, which is still far and far behind other provinces for being the least developed, most backward and the poorest province. A special endowment fund needs to be set up for financing social and physical infrastructure projects for bringing it on par in social indicators with other provinces.