ISLAMABAD: Sui Southern Gas Company (SSGC) was asked to revisit its decision of revoking gas supply contract with largest LPG producer in large national interest.
The Senate Standing Committee on Petroleum and Natural Resources met here on Monday to look into the matter of closure of local LPG Production. The parliamentary body directed the gas distribution company SSGC to revisit its decision and ensure gas supply.
The Senate4 body met on the special request of chairman LPG Distributors Association Pakistan, Irfan Khokhar for immediate intervention of the parliament to restore the LPG gas local production. The supply was halted by SSGC after revoking the contract with largest LPG producer company Jamshoro Joint Venture Limited (JJVL) in June 2020.
The committee was informed that shuting down the local LPG production has caused the loss of 9000 Metric Tons local gas production per month. Besides the revoking of contract between SSGC and JJVL caused a loss of Rs. 170 million per month to national kitty under head of Sales tax.
It was also informed that during the last fifteen years, the largest local LPG producer of the country contributed the revenue of Rs. 84 billion, while the national kitty was bagged Rs. 19 billion under the head of taxes and duties.
SSGC representatives at the hearing said it was a government decision to halt local LPG production since most of the directors on the SSGC board are nominees of the government. SSGC stopped gas supplies to Jamshoro Joint Venture Limited (JJVL) on June 21, 2020.
As a result some 9,000 metric tons of LPG and 4,000 metric tons of NGL disappeared from the market, leading to price volatility and an additional burden on the current account deficit from imports, which will cost an estimated $50 million this year.
“SSGC must review and revisit its decision keeping in mind the full utilization of national assets and local resources in the national interest,” said Senator Mohsin Aziz, Chairman of the Senate Standing Committee.
“SSGC is a national flag carrier in the oil and gas sector and has a responsibility to consumers.”
JJVL, commissioned in 2005, has provided SSGC with income of Rs. 84 billion since then and a profit of over Rs. 29 billion without any investment on the part of SSGC, JJVL Director Fasih Ahmed told the committee.
“JJVL serves the energy requirements of 750,000 households nationwide and has created 5,000 direct and indirect jobs,” he said.
“Over 15 years, it has paid Rs. 19 billion in taxes, had export earnings of $261 million, and yielded $1 billion in foreign exchange savings through import substitution.”
Committee member, Senator Taj Afridi strongly urged restarting local LPG production at JJVL to improve the investment climate in the country and to ensure energy security.
He said that sales tax is 17 percent on local LPG production and 10 percent on LPG imports, and asked the Ministry of Energy to provide a level playing field to all investors.
Asad Hayauddin, Federal Secretary of the Ministry of Energy (Petroleum Division), said that the Federal Cabinet’s Economic Coordination Committee will be reviewing the JJVL matter on Wednesday. He added that LPG is part of the national energy security plan and the disparities between the pricing structure of local LPG production and LPG imports are being ironed out by a special committee led by the Deputy Chairman of the Planning Commission.
Irfan Khokhar, Chairman of the LPG Distributors Association, said the decision to restart local LPG production would serve the national interest and facilitate reduction of consumer prices.
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