Rs17.6bn for LPG air mix plants, fresh loan for Nandipur project approved

ISLAMABAD: The Economic Coor­din­ation Committee (ECC) on Monday allowed setting up of 65 liquefied petroleum gas (LPG) air mix plants with an estimated cost of Rs17.6 billion and constituted a price negotiation committee for import of additional quantities of liquefied natural gas (LNG).

Presided over by Finance Minister Ishaq Dar, the ECC meeting also approved Rs30.6bn loan for controversial Nandipur Power Project and purchase of electricity from captive power plants to meet shortage in next two years besides allowing supply of 50,000 tonnes of wheat for displaced persons of Khyber Pakhtunkhwa and the tribal region.

An official statement said the ECC approved a summary of the petroleum ministry for setting up of LPG air mix plants, starting from Murree’s Kurbagla, Dewal, Company Bagh and Tret and Awaran and Bella in Balochistan, at the cost of Rs1.353bn to be funded by Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL), said an official statement.

It said the gas utilities would finance these projects through their own resources. An official said the financing would be made part of the revenue requirement of the gas companies and charged to consumers through weighted average cost of natural gas to all consumers. The impact of first three LPG air mix plants was estimated at 32 paisas per unit on countrywide natural gas.

The meeting also decided that private sector housing colonies would be free to establish their own LPG air mix plants subject to fulfilment of all codal formalities such as licensing by the oil and gas regulator and explosive licences etc.

The meeting decided that in addition to the above mentioned plants 30 new air mix plants each on SSGCL and SNGPL system will be constructed in AJK, Chitral, Gilgit Baltistan and backward areas of Balochistan.

“The setting up of the LPG air mix plants will save these areas from the rapid deforestation in these areas”, the statement said.

The decision would lead to expansion in the pipeline network of the gas utilities to market and supply a product that was until now limited only through tankers and cylinders. SNGPL and SSGCL consumers would bear part of LPG price as cross subsidy. Ogra had opposed to these plants a few months ago saying “these plants are economically unfeasible, constitutionally discriminative and legally inconsistent with the existing framework and the federal government’s earlier decisions”.

Ogra said the “consumers of LPG air mix shall get subsidy at the cost of natural gas consumers while in the rest of country, the LPG consumers at the same time will be paying a higher cost. Thus, it will indulge discrimination and impair the interests of existing natural gas consumers”.

LNG committee: The ECC also constituted a Price Negotiation Committee (PNC) for the LNG supplies from Malaysia, Russia, France, Italy, Oman and Azerbaijan in the wake of the growing demand of energy in the country.

ECC also decided that the PNC will engage with all the energy supplying companies in the process to finalise the best deal for the country.

SOVEREIGN GUARANTEES: The meeting also approved the issuance of second revised Government of Pakistan Sovereign Guarantees up to Rs30.613bn for the 425MW Nandipur Power Project. These guarantees will remain valid till May 31, 2017. Interestingly, the ECC had last year approved similar guarantee for Rs37bn for one year to retire this debt but it could not be cleared so far, hence a rollover.

The ECC also approved the proposal of the power ministry for utilisation of power generated through captive power plants, as a short term measure, in order to optimise use of available generation in the coming summers of 2017 and 2018.

The ministry is expecting about 300-600MW of additional capacity from these CPPs of the major industrial houses. Under the scheme, the electricity will be purchased from plants having capacity of 3MW or above on gas, furnace oil, coal, bagasse and other fuels.

They will be offered energy purchase against a tariff based on take and pay basis and electricity to be actually delivered to the national grid. The plants would not be paid capacity charges.

WHEAT FOR DISPLACED: The ECC also approved the summary moved by the Ministry of States and Frontier Regions for the provision of 50,000 tonnes of wheat costing Rs2.007bn to the United Nations World Food Programme for the temporarily displaced people of Fata and Khyber Pakhtunkhwa.

The approved quantity will be distributed to the target population from December 2016 to June 2017. This quantity is the second such tranche after the provision of 124,000 tonnes of wheat costing Rs4.977bn to the displaced population. The stocks from the earlier grant will be exhausted in November as reported by the World Food Programme.