Islamabad: Federal government led by PMLN to divide SSGCL and SNGPL into five public sector companies but provinces didn’t accept the idea especially KPK and Sindh.
This also creates two different tiers of gas consumers one based on local natural gas and the other on imported liquefied natural gas (LNG) at two different prices.
Tier-one will comprise domestic gas delivered on an as-and-when-available basis, based at regulated prices set by the government like as done at present.
Tier-two will comprise imported gas delivered on a firm basis at market price with all costs of delivering LNG. Private consultants have concluded that the separate tiers would ultimately need to be merged in four to five years owing to declining local supplies.
This is despite the fact that independent consultants have found the proposed unbundling of SSGCL and SNGPL to negatively affect equity value, make the gas distribution companies unviable and increase financial pressure on the government and consumers.
While the provinces generally agree on the need to reform the gas sector in view of rising shortfalls, they unanimously oppose the reforms in the manner proposed by the federal government.
Even so they also have some internal differences in view of their diverging interests, with producers Sindh, Khyber Pahktunkhwa and Balochistan on the one side and the largest gas consumer Punjab on the other.
Punjab needs to have secure sources of gas supply even though it has negligible indigenous production and wants to retain existing supplies flowing from other provinces while also looking to bank on expensive imports at the cost of its industrial competitiveness.
It thinks the unbundling of gas companies, proposed by the World Bank and pushed forward by the Centre, could be a double-edged sword. It has put on record that the experience of Wapda’s unbundling had not been welcome and yet the unbundling of gas companies was designed on the same pattern.