NFC compelled to evolve new formula to measure GDS

By Khalid Mustafa

ISLAMABAD: The unwavering support extended by Punjab and NWFP to Balochistan on the issue of gas development surcharge (GDS) compelled the National Finance Commission Friday to evolve new formula to measure GDS. Finance minister Shaukat Tarin, who chaired the NFC meeting, has constituted a sub-committee to furnish recommendations to resolve the issue by October 12, a senior official who attended the meeting told The News.

Balochistan wants NFC to abandon the existing proportionate gas cost production formula to determine the GDS and demands that it should be based on 50 percent on proportionate gas cost production and 50 percent on GDS production based on weighted average wellhead price of the province and weighted average sale price.

If the new formula as demanded by Balochistan is implemented then for the current fiscal, the country will have Rs16 billion as GDS. This will enhance Balochistan’s share from the current Rs3.5 billion to Rs7.5 billion.

Qaim Ali Shah, chief minister Sindh told reporters after the meeting that decision on gas development surcharge might not be a consensus one and in case no settlement is reached between Balochistan and Sindh, the chairman NFC will decide the issue on his own.

He said that Sindh is producing about 72% of natural gas and transportation charges are low because the manufacturing units are located near Mari gas and Kundkot gas fields.

Mr Shah also confirmed that a broad decision has been taken that the provinces where natural resources have been found will benefit the most. He was of the view that the federal government has resolved the issue of net hydel profits while the issue of GDS is being resolved. He said GST on services is not a complicated issue.

Tanvir Ashraf Kaira, finance minister Punjab, told reporters that GST on services was not discussed in the meeting due to time limitation; however, to settle the issue of gas development surcharge a committee has been formed with representation from all the four provinces. Punjab and Balochistan have stressed the need for judicious resource distribution under the new formula.

The meeting was basically scheduled to listen to the opinion of the constitutional and legal experts to assess whether the issue of GST on services falls in the jurisdiction of the centre or provinces.

“The secretaries committee is finalising expenditures benchmarking and vertical resource distribution recommendations,” Tarin said. “This report is to be tabled in the next NFC meeting where total resource availability will be determined. The federal as well as provincial shares will also be decided.”

“The centre has a major portion of expenditures on debt servicing, defence and subsidies and the consultations with provinces are going on to decide whether the centre should continue to incur these expenditures alone or share them with the provinces,” Tarin added.

Due to time limitation and lengthy debate on GDS issue, the remaining agenda items were deferred till the next meeting of NFC at Quetta on October 12-13.

Finance minister Shaukat Tarin said a sub-committee consisting of technical members has been set up to settle GDS issue. Secretary petroleum, chairman OGRA, and representative of finance ministry would be members of this committee, he told.

The committee would review GDS formula, work out its recommendations and present them in the next meeting of NFC. He said the NFC would hold its meetings regularly so that the award could be given final shape as soon as possible.

“We want to move forward on the NFC issue in a manner that all the provinces must feel that they are being treated on equal basis and justice is being done to them,” added Tarin.

The minister hoped that all the major issue like GST on services, GDS, vertical and horizontal distribution of financial resources as well as other items mentioned in terms of references (TORs), which are still to be finalised, would be settled in seven to eight meetings.

Tarin said Sindh has its reservations over centre’s views on GST on services and independent international experts will be consulted in this regard. He said that Balochistan has not tabled its demand for Rs300 billion as gas royalty and GDS arrears.

Mir Asim Kurd, finance minister Balochistan termed the setting up of sub-committee on GDS as major development and hoped that this would help resolve the issue. He informed reporters that Balochistan has asked the federal government to clear Rs150 billion GDS arrears and Rs150 billion gas royalty arrears.

Humayun Khan, finance minister NWFP did not respond to the question on NEPRA’s presentation on determination of net hydel profits in the future. He too expressed satisfaction over setting up of a sub-committee on GDS. Link...