The non-transparent LNG deal?

The non-transparent LNG deal?

Documents available with Business Recorder reveal that the Cabinet Committee on Energy (CCoE) has approved a mechanism of direct payment for LNG imported from Qatar to Pakistan State Oil (PSO) by the Ministry of Finance from the subsidy payable to power sector. Three major conclusions can be drawn from this. First that the letter of credit was opened by the PSO, an entity that comes under the administrative control of the Ministry of Petroleum and Natural Resources, and not by any private sector entity including the CNG sector and the fertilizer sector. Secondly, PSO and its parent ministry would therefore naturally be engaged in negotiating a price for LNG import with Qatar. And finally, subsequent to the arrival of one LNG shipment to Pakistan to maintain that the price of LNG has not yet been agreed between the governments of Qatar and Pakistan defies belief. Brotherly relations aside, no government is going to send one consignment to another country valued at millions of dollars, without first reaching an agreement on price.

Be that as it may, the following is the pricing formula approved by CCoE for the LNG import: (i) LNG price DES; (ii) PSO margin; (iii) terminal charges; (iv) SSGCL administrative margin for LSA; (v) SSGC cost of service and or transportation charges; and (vi) transmission and distribution losses. However, the exact amount to be charged under each head is not available and as such neither the per unit import price of the commodity nor any other prices under items (ii) to (vi) above have been released to the public. The allocation of the imported gas has also come under severe criticism. Shahid Khaqan Abbasi publicly stated that the CNG and fertilizer sectors would benefit from the first consignment but later the CNG sector was ignored (much to the chagrin of the sector claiming that each station had set aside major finances to procure LNG from the first consignment). The fertilizer sector was considered to be the main beneficiary of the first consignment but that policy too was revised and eventually the entire LNG cargo was dispatched to one company namely: Pak-Arab Fertilizer. One would have assumed that given the massive continuing energy shortfall the government would have preferred allocating LNG to those sectors that use it as a fuel notably the power sector whereas the fertilizer sector uses LNG as raw material. That too has inexplicably not happened and no clarification has been forthcoming with confusion fuelling accusations of massive kickbacks.

What is extremely unfortunate is that the incumbent government has been taking several economic decisions with millions of dollars of the taxpayers’ money involved that are simply not transparent. Shahid Khaqan Abbasi has stated on the electronic media that the government is considering amending the public procurement rules that would facilitate the agreement on LNG imports. This no doubt must have further raised the hackles of analysts and civil society alike given the fact that already the government has been agreeing to commercial deals that are violative of the PPRA rules by citing national interest.

Disturbingly, the Prime Minister has stood by the flawed non-transparent decisions taken by his cabinet members – (for example, the Nandipur project and import of substandard wheat from Ukraine and Russia with large wheat stocks held in our godowns) and non-transparent alike – because of the rather strange logic that firing any cabinet member for lack of performance would weaken his government. This approach belies his earlier stance that he would constantly review the performance of each minister and minister of state and those found wanting would be fired. One can only hope that the Prime Minister takes cognizance of the performance of his cabinet colleagues and takes appropriate measures when found wanting.

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