ISLAMABAD: The government has called another meeting of the Economic Coordination Committee (ECC) on Wednesday for constitution of a price negotiation committee for Turkmenistan-Afghanistan-Pakistan-India (Tapi) Pipeline and settlement of about Rs75 billion liabilities to state-run entities.
To be presided over by Adviser to the Prime Minister on Finance & Revenue Dr Abdul Hafeez Shaikh, the second meeting of the ECC within a week will be presented a case for payment of Rs28bn dues to the Pakistan State Oil (PSO) on account of foreign exchange loss besides settlement of Rs38.12bn loans acquired by Water & Power Development Authority (Wapda) for payment of net hydel profit (NHP) to the provinces.
A senior government official told Dawn that PSO had been authorised by the Ministry of Finance to arrange foreign exchange requirements for oil imports under FE-25 to release pressure on the country’s foreign exchange reserves. The finance ministry had allowed a credit limit of up to Rs600bn.
He said the PSO had objected to arrangement because of exchange rate fluctuations but had been given an assurance by the finance ministry that its foreign exchange loss, if any, would be borne out of the federal budget. Such cumulative losses to PSO had now gone up to Rs28bn, posing serious financial and accounting problems as its circular debt receivables were now bordering Rs350bn.ARTICLE CONTINUES AFTER AD
Now, the petroleum ministry has moved a case for payment of “exchange losses incurred by PSO on FE-25 loans booked on the instructions of the Finance ministry” as the incumbent authorities wanted to have ECC’s sanction to avoid accountability issues.
A senior official said the ECC was also expected to constitute a price negotiation committee (PNC) for Tapi project. He said it was for the first time in the current government that ECC would be updated on the status of Tapi pipeline and the need for renegotiations with Turkmenistan (M/S Turkmengaz) for price of gas to be delivered through Tapi pipeline.
The petroleum ministry has now proposed the committee will be led by secretary petroleum comprising secretaries of finance, power division, Director-General of Gas and managing directors of SNGPL, SSGCL.
The pipeline project envisaged import of natural gas from the Galkynish and adjacent gas fields in Turkmenistan to Afghanistan, Pakistan and India. For implementation of the project, Inter-Governmental Agreement (IGA) and Gas Pipeline Framework Agreement (GPFA) were executed on Dec 11, 2010 after approval of the Federal Cabinet.
The Gas Sale and Purchase Agreement (GSPA) between Inter-State Gas System Ltd (ISGSL) and Turkmengaz for the supply of 1.3bfcd gas to Pakistan was signed in 2012 wherein the pricing of the gas was determined and agreed with Turkmengaz.
There has been a considerable delay in the project’s execution, as a result of which Pakistan had to explore alternative avenues to fulfil its growing gas demand including alternative energy projects and competitiveness of the gas price required to be reviewed and updated in view of global oil and gas prices.
Turkmenistan, which is leading a special purpose vehicle with 85pc share for laying the pipeline, has agreed to discuss and renegotiate the gas price. Given the considerable commercial exposure, the petroleum division has suggested PNC on the pattern of similar committees in the past including that for LNG imports from Qatar.
The sources said the ECC would also take up settlement of Rs38.12bn financial facility raised by Wapda from Habib Bank Ltd (HBL) for the settlement of NHP.
The ECC will also consider approval of a technical supplementary grant of Rs1bn under a demand of the cabinet division for payment of Pakistan Tourism Development Endowment Fund during 2019-20.
The committee is also expected to extend Government of Pakistan (GoP) guarantee against Rs5bn credit facility of National Bank of Pakistan (NBP) for the Utility Stores Corporation to provide essential kitchen items to the people at lower than the market rates.
The ECC will also take up release of about Rs80 million of outstanding gas bills to SSGCL on account of minimal gas supplies being provided to Pakistan Steel Mills to keep its machines in heat mode. The PSM had been on zero production heat mode since June 2015 after its gas bills went beyond Rs35bn and the gas supplies were cut.
The Ministry of Industries and Production has now moved a summary to the ECC for payment of Rs80m to SSGCL to avert total gas disconnection that will freeze PSM’s machines, coke ovens and related infrastructure. The SSGCL is currently providing about 3 million cubic feet of gas to PSM.