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All gas subsidies to be withdrawn

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    All gas subsidies to be withdrawn

    All gas subsidies to be withdrawn

    By Nadeem Malik

    ISLAMABAD: The government has decided to withdraw all subsidies on
    gas, and move towards a market-driven pricing mechanism.

    "The government wants to deregulate oil and gas sector by disengaging
    itself from the day-to-day business with effect from March 15, 2001,"
    said Abdullah Yousaf, Secretary Ministry of Petroleum and Natural
    Resources in a joint press conference with Dr. Akram Sheikh, Secretary
    Ministry of Water and Power, after the Pakistan Development Forum
    meeting here on Tuesday.

    The new gas prices would be determined on the basis of wellhead prices,
    by adding T&D cost, taxes and guaranteed returns on investment. Basis
    of price will be the cost of service and no cross-subsidy will be provided
    to any sector of the economy. This will mean that bulk users of gas, like
    industrial and commercial consumers, would pay less, and retail
    consumers (domestic sector) would pay higher prices. The domestic
    sector subsidy would be withdrawn in a phased programme of 3 years.
    However, small consumers of 0-100 cubic feet gas per month, would be
    protected in this adjustment process.

    Similarly, withdrawal of subsidy from fertilizer feedstock is under
    consideration, which would be announced after formal approval of the
    fertilizer policy.

    The POL prices have already been deregulated. Similarly, LPG prices
    would also be de-controlled. In this regard, the government is also in the
    process of establishing a Petroleum Regulatory Authority, which would be
    functional by July 1 this year. All the oil and gas sector assets are up for
    sale, and efforts are being made to expedite the privatisation process.
    The government's investment interest would be watched by a holding
    company, which would be put in place by July 1, 2001, this was officially
    told to the PDF meeting.

    The import of furnace oil has already been deregulated, and almost 75%
    diesel imports are also being made by the Oil Marketing Companies
    (OMCs). The remaining 25% import deregulation would be done from April
    1, 2001.

    The Ministry of Petroleum has also decided to phase out freight pool (Rs
    15 billion) process completely. The furnace oil had already been removed
    from freight pool. Petrol and diesel would also be removed from the
    freight pool with effect from March 15, 2001. The freight equalization
    would be limited only to 29 depots. The complete management of freight
    pool would be handed over to the OMCs from March 15.

    The government has also decided to rationalise the margins of the
    marketing companies, so that they can invest in storage and other
    infrastructure for oil. With the development of new gas fields, the
    oil-fired power stations in the country would be switched to gas, saving
    $600 to 700 million per annum.

    Secretary Petroleum also stated that federal cabinet is likely to take up
    the issue of oil price reduction, under the quarterly adjustment formula,
    on Wednesday. He indicated that sizeable reduction was possible due to
    considerable decline in the international oil prices during the last quarter.
    These prices are worked out on the weighted average basis, after
    adding the Petroleum Development Surcharge (PDS). The government is
    currently collecting Rs50 billion tax on POL products in the shape of 15%
    GST and PDS. He said the ministry has forwarded two separate proposals
    to the Cabinet.

    Dr. Akram Sheikh, secretary Ministry of Water and Power, warned of
    severe water crisis if immediate remedial measures were not taken.
    "Water is short," this is a very difficult problem, if not very serious at the
    moment, he said.

    He stressed the need of new water reservoirs in the country, which he
    said have been identified. He also outlined a short-term rescue plan of
    water conservation, better management and equitable distribution
    among provinces to minimise the adverse impacts. He said there was a
    need to develop new storage capacities to handle 30 to 40 million acre
    feet water in the country. The existing capacity is only 17 million-acre
    feet, which is extremely insufficient to cater to the growing needs of the

    Dr. Akram also announced that a plan is being conceived to re-circulate
    city wastewater to the irrigation system. The current water usage of
    Karachi and Lahore alone is 650 million gallons a day.

    He said the Ministry is also working on the drip irrigation system to
    replace flood irrigation to overcome acute water shortages in the
    country. He, however, maintained that it was transient phase due to
    weather phenomenon. He stated that the existing water potential of the
    country was 160-170 million-acre feet, which need to be fully exploited
    through construction of new water reservoirs.

    He also briefed about the future power policy of the country, which
    would focus only on the hydel generation and shifting of oil-fired thermal
    plants to gas. He said many dams have been identified across-Pakistan
    with 16000MW generation capacity at an investment of $24 billion.

    In the short-run, he said, 8 hydel power plants have been planned with
    715MW capacity at a cost of $770 million. He said the government would
    pursue a public-private partnership in the hydel generation to cover the
    associated risks.


    This is good, giving the people at home the break as oil and gas prices increase world wide.

    You can't fix stupid. So might as well troll them!

    A sensible move indeed which should inshallah bring extra relief to the people of Pakistan. It is also in line with the CE's move to deregulate and revive the Pakistani economy. Good news.