Unused funds to be spent on gas projects


The government has approved a plan of transferring unspent funds and savings from gas supply schemes to provinces, a move that may invite some criticism.

Gas schemes are considered an easy tool in far-off areas of the country to win over voters during elections.

This comes in the backdrop of gas shortages that have put an extra burden of Rs73 billion due to diversion of expensive imported gas to meet demand from domestic consumers.

The current Pakistan Tehreek-e-Insaf (PTI) government had diverted costly liquefied natural gas (LNG) to domestic consumers but there was no mechanism in place to recover the cost of Rs73 billion from them.

Imported gas had been supplied to domestic consumers in the past two winter seasons in a bid to overcome the gas crisis, but at the same time the cost accumulated because of LNG being an expensive fuel compared to local natural gas.

Earlier, the government had approved a ceiling on expenditures being made on gas supply schemes. Now, it has endorsed an amendment according to which unspent funds/savings from gas development schemes can be spent in any district and province on new and old gas projects with approval of the Sustainable Development Goals Achievement Programme (SAP) steering committee.

According to the Cabinet Division, it has been running a community-based SAP to cater to the community development needs at the gross-roots level.

The programme has been supervised by the steering committee, headed by the federal minister for defence and its members comprised parliamentarians, representatives of provincial governments, federal ministries and divisions.

The SAP steering committee, in its 15th meeting held on August 10, 2020, incorporated an amendment by deleting Para 3(vi) and replacing it with the following: “Unspent funds/savings from gas development schemes can be spent in any district and province on new and old gas schemes with approval of the SAP steering committee”.

The Cabinet Division also approved the amendment after detailed discussions.

Earlier, the government eased the expenditure policy and scrapped the upper cap on the cost of politically motivated gas supply schemes, which would be undertaken under SAP.

It came in the backdrop of gas shortages that put a burden of Rs73 billion due to supply of imported LNG to domestic consumers to bridge the demand-supply shortfall.

The Petroleum Division had prepared a summary in June 2019, seeking amendments to SAP guidelines. The federal cabinet approved the summary in September 2019 and also enhanced the cost ceiling for gas supply schemes under SAP to Rs300 million.

The cabinet also permitted public gas utilities to undertake gas supply projects of higher costs following relaxation in the cost limit.

Following relaxation in the gas supply schemes and transfer of funds to provinces, the gas network will be expanded to remote areas, but it will lead to more gas scarcity and increase in its prices.

Public gas companies are guaranteed a 17.5% rate of return, therefore, any widening of the network will provide more revenue to them on account of a hike in gas prices.

Moreover, it will aggravate the gas crisis in coming years as there has been no rise in domestic natural gas production over the past two decades.

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