Development funds to be cut by Rs114bn

ISLAMABAD: Funds of Rs114 billion will be cut in the federal development budget of the current fiscal year 2023-24, as the National Economic Committee (NEC) on Monday decided that only 10 percent funding would be made available for the new development projects which could play part in the national progress.

The NEC meeting, with caretaker Prime Minister Anwaarul Haq Kakar in the chair, approved recommendations of Special Investment Facilitation Council (SIFC) and also set guidelines for completion of ongoing development projects during the financial year 2024-25. On the SIFC recommendation, the meeting directed that Skill Development Programme and Youth Endowment Scholarship for Talented Students under the Prime Minister’s Programme for Youth Development should continue and provision of funding from the national development budget should be ensured for the purpose.

The meeting, while setting priorities and new guiding principles for the budget 2024-25, decided that funding for completion of development projects on which 80 percent progress had been made would be completed on priority basis.

Caretaker federal ministers Dr Shamshad Akhtar, Sami Saeed, Shahid Ashraf Tarar and chief ministers also attended the meeting.

The interim PM told the meeting that development projects should be focused on the social welfare so that taxed money be spent on people’s welfare. He directed that work on the major development projects should be expedited for completion within the stipulated period.

Kakar particularly mentioned that the caretaker federal government gives importance to consultation with caretaker provincial governments while taking decisions about development plans, and pointed out that the NEC was biggest constitutional body for taking economic decisions.

He stressed that the development projects of infrastructure of communication, hydel power and water reservoirs, agriculture, industry and information technology should get special importance.

The NEC, while taking up six-point agenda, decided that the development budget for the fiscal year 2024-25 should be limited to 20 backward districts and newly merged districts of erstwhile Fata.

It was also directed that development projects in newly merged districts and backward districts should be completed on priority basis along employment to population of those areas to make them part of economic progress.

The meeting was apprised that economic growth rate during the first quarter of the ongoing fiscal year remained 2.1 percent against set target of 3.5 percent by June 30, 2024.

The meeting was also informed that the Federal Board of Revenue (FBR) exceeded tax collection target for the period from July to December this fiscal. The effective measures taken by the caretaker government to control smuggling and against illegal business of foreign currency strengthened national currency.

Meanwhile, the Council of Common Interests (CCI) Monday opened up the gas sector for the private sector to improve the liquidity crisis of the existing exploration and production companies and also give a competitive environment to the public sector gas companies — Sui Southern and Sui Northern.

The supreme decision-making body has allowed the OGDCL, PPL, and GHPL, Mari gas to directly sell 35 percent of their gas production and 65 percent to the gas companies. The CCI also approved the tight gas policy which will help discover 500mmcd to 1000mmcfd in three years.

A 40 percent premium over the respective zonal price of Petroleum Policy 2012 will be given to the producers of tight gas reserves.

The wellhead price for tight gas will be offered at $7.5 per MMBTU as the technology and high tech are involved in it. So, the government will get 40 percent taxes and royalties out of it and the net well price would be hovering at $5.50 per MMBTU.

The 500-1000mmcfd tight gas will replace the import of costly RLNG of cost that stands at $13 per MMBTU which also eats up the precious foreign exchange.

Selling the gas to the private sector at higher prices as compared to the sale price of gas to SUIs will have a net impact of gas increase by 80 cents per MMBTU which will be nullified when tight gas of 500-1000mmcfd will replace the RLNG import after three years.

In summary, the Petroleum Division had proposed that the E&P companies would sell 50 percent to the private sector and 50 percent to Sui Southern and Sui Northern, but the gas companies in the meeting opposed it. However, the CCI allowed the E&P companies to sell 35 percent of their gas production against the proposed 50 percent allocation.

The private sector will use the transmission and distribution system of Sui gas companies to sell the gas to their clients. This initiative will help reduce the liquidity crisis of exploration and production companies, as their circular debt has increased to Rs1.273 trillion because of non-payments by the Sui gas companies for decades. Owing to non-payments, many international companies have left the country.

Earlier, the state-owned exploration and production companies were bound to give 90 percent gas to Sui Southern and Sui Northern and 10 percent to the private sector.

The 10 percent gas was negligible which is why no reasonable private sector in the past purchased it.

Under the latest CCI decision, the top officials who were part of the meeting said that 35 percent of gas will be sold to the private sector by E&P firms from new gas discoveries as the CCI argued that the opening up of the gas sector takes place in phases and if the result of 35 percent gas allocation to private sector brings dividends and improves the economic outlook of OGDCL, PPL, GHPL, then in next phase, the E&P will be allowed to further increase the sale of gas to private sector.

The SUIs will continue to have 90 pc gas supplies from existing gas wells. However, from new finds, the SUI will be supplied 65 percent gas.

The gas companies were of the view that their good clients would go to the private sector; however, officials said 65 percent gas will be given to the SUIs at the existing rate, but the private sector will be provided the gas under auction which will certainly be above the price at which SUIs will be having gas from new discoveries.

According to sources, the council approved the withholding of funds for dozens of projects worth Rs314 billion — six projects worth Rs164 billion under the development package of the Prime Minister and provincial projects worth Rs121 billion bearing zero progress and Rs29 billion for the schemes of members of parliament (MPs). Funds of Rs.114 billion will be cut in the federal development budget of the current fiscal year 2023-24 as per the decision.

It has also been decided not to include provincial projects in the federal development budget in the future. However, it will not apply to the former FATA and 20 backward districts.