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ECC cuts 33 percent in gas prices for industrial sector

By our correspondents
November 26, 2016

Rs400/MMBTU

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Friday approved a nearly 33 percent cut in prices of natural gas, the first such slash this year, for the industrial sector.

A statement said Ishaq Dar, minister for finance, chaired the ECC meeting, which “… approved reduction of gas price for industry from Rs600 to Rs400/MMBTU.” “In accordance with Fertiliser Policy 2001, the industrial sector's gas sale price will also be applicable to fertiliser sector and only for fuel stock,” it added.

Analysts said the ECC’s unanticipated move of price reduction is applicable on industrial consumers, including fertilisers. “However, the said reduction does not impact captive power consumers, which also include cement producers,” analyst Fahad Qasim at Topline Securities said.

Qasim said the fertiliser producers will most likely to pass on the impact of gas price cut due to oversupply situation.  

“Other sectors that are potential beneficiaries for gas price cut are chemicals, glass, textile and steel and many others,” he added. “Moreover, gas marketing companies, including Sui South and Sui North work on a fixed asset return formula, due to which, any reduction in gas prices does not impact earnings of these companies.”

Qasim, however, said the decision would only impact gas marketing firms' cash flows as “reduction in gas prices result in lower cash inflows from consumers and increase in receivables from the government.”

“However, reduction in gas prices can result in lower unaccounted for gas (UFG) losses in absolute terms for gas marketing companies.”

The government statement said the ECC also accorded approval to the proposal of the ministry of national food security “regarding extension in export period of thirty days from the date of approval (i.e. 15-06-2016) on the same terms and conditions already approved” for the export of wheat/wheat flour. “The extension is limited for the balance quantity already approved for export for Sindh and Punjab,” it added.

The ministry apprised the ECC that the food departments of Sindh and Punjab and All Pakistan Flour Mills Associations and exporters have pleaded for extension “as the specified quantity of wheat/wheat flour (Aata) could not be exported within the specified period due to Eid holidays and transportation problems etc.”

The ECC was approached by the food ministry to grant extension of 30 days to allow the rebate payment on export of wheat and wheat flour -- September 30, 2015 to October 30, 2015. 

“It was decided that the extension on payment of export rebate would only be available to those exports, which have been shipped/transported (GD) on or till 30th September 2015 deadline,” the statement said.

The ECC upheld the earlier decision that export of wheat and wheat flour made during the period from October 1, 2015 to January 12, 2016 should not be entitled for any such support.

The statement said the ECC also  approved a settlement reached between the ministry of water and power and Sindh government to resolve the issue of outstanding bills of various provincial departments and HESCO/SEPCO (Hyderabad and Sukkur power distributors) for the period of July 2010 to July 2016.

“Sindh government will clear the outstanding amount of Rs27.398 billion in six equal monthly installments, starting from September 2016,” it added. “In the same decision, the chair also directed ministry of water and power for installing AMR meters (smart meters) in the area within four months, with 50 percent of the cost of the installation of meters to be borne by Sindh government so that the issue may be settled on permanent basis.”