ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Wednesday allowed continuation of gas supply to Fauji Fertiliser Bin Qasim for another five years and removed a cap on dividend distribution on Mari gas to facilitate divestment of about 20 per cent of its shareholding.
A meeting of the ECC presided over by Minister for Finance and Revenue Dr Abdul Hafeez Shaikh also approved a technical supplementary grant of about Rs190 million, including Rs150m for advertisement campaign for projection of government activities on Covid-19 and Kashmir Solidarity Day.
The gas supply agreement between Sui Southern Gas Company Limited (SSGCL) and Faui Fertiliser Bin Qasim expired on Dec 31 last year and the latter wanted continuation of supply of about 83 million cubic feet per day at the existing subsidised rates of Rs302 per mmbtu (million British thermal unit) for feedstock and Rs1,023 per mmbtu for power generation, steam and housing colonies.
After a detailed debate, the ECC approved the renewal of gas supply agreement for five years only on “as and when available basis” and also said SSGCL might restore gas supply to Fauji Fertiliser till December 2021 or until a uniform rate for the whole fertiliser sector was formulated after rationalisation of tariff.
Informed sources said this meant the fertiliser company would not be able to get guaranteed gas supply like in the past because the power sector was on the second place of gas priority list. The government is already working on various gas pricing models that would ultimately mean weighted average cost of gas and imported LNG (liquefied natural gas) for all fertiliser plants instead of the existing preferential treatment in gas pricing for the sector.
The ECC also approved a summary of the Petroleum Division for removal of dividend distribution cap on Mari Gas Company Limited (MPCL) under the gas pricing agreement to facilitate the privatisation of 18.4pc of its shares.
Under the existing arrangement, the company cannot distribute more than 45pc dividend among its shareholders, mostly the public sector. As such the company keeps a major part of its profit for exploration and development activities. However, large capital has been built owing to limited activities.
The decision is expected to improve MPCL’s worth by about Rs1.4 billion. The existing gas price agreement of the company is to expire in 2024 during which time the government wants to divest 18.4pc shares to the private sector and removal of cap on dividend distribution is expected to attract better share price.
“After due deliberation, the ECC allowed that the dividend distribution cap may be removed to ensure that the divestment transaction generates optimum sale proceeds for the government. The committee further decided that MPCL would ensure dividend distribution in accordance with the Provisions of Companies Act, 2017 and the Companies (Distribution of Dividends) Regulations, 2017,” an official statement said.
This means the board of directors of MPCL in line with shareholding of various shareholders will be able to take decisions on dividend distribution like any other listed company.
The MPCL management is in the hands of Fauji Foundation despite controlling only 40pc of total shares. Fauji Foundation had been insisting that as per the 1985 agreement, the management should remain in its hands even after the government sells its residual shareholding. At present 20pc shares are in the hands of public. About 20pc shares are held by Oil and Gas Development Company Limited and 18.4pc by the government.
The ECC approved another summary of the Petroleum Division for reallocation of gas from Saqib-1A Well in Ghotki district of Sindh to M/s Sui Southern Gas Company Limited from its previous allocation to SNGPL as approved by the ECC on Oct 6, 2009. The price of gas will be as per the applicable petroleum policy.
On the recommendation of the Ministry of Housing and Works, the ECC allowed the ministry to utilise its own funds equal to Rs377.21m for renewal of lease of Garden West (Pakistan Quarters), Karachi.
The ECC also approved a supplementary grant of Rs141.308m to the Ministry of Information and Broadcasting for expenditure on media campaign relating to Covid-19 and another Rs9.025m for the same on the occasion of Kashmir Solidarity Day (Feb 5, 2021).
The ECC approved another Rs5m grant for purchase of spare parts for helicopter maintenance by Rangers (Punjab) headquarters (HQs), Rs25m for the same purpose by Frontier Corps Balochistan (South) HQs and Rs10m by FC Khyber Pakhtunkhwa (South) HQs.