ISLAMABAD (PEN) : In the current fiscal year 2024-25, Khyber Pakhtunkhwa is set to receive Rs. 89.8 billion in revenue from its oil and gas sectors, a significant increase from Rs. 42.8 billion in the previous year. This funding will come from various sources including Royalty on Oil and Gas, Gas Development Surcharge, Excise Duty on Natural Gas, and Windfall Levy.
Specifically, KP will earn about Rs. 26.2 billion from royalties on crude oil and natural gas, compared to Rs. 25.1 billion last year. Additionally, the province will receive Rs. 11.4 billion from natural gas royalties, Rs. 2.7 billion from the Gas Development Surcharge, Rs. 2.7 billion from Excise Duty on Natural Gas, and Rs. 46.8 billion from the Windfall Levy.
According to the 7th National Finance Commission (NFC) Award, KP’s share in the royalties is based on the proportion of crude oil produced in the province compared to the national total.
Royalty on Oil and Gas is paid by exploration and production companies at a rate of 12.50% of the wellhead value, with 2% retained by the federal government and the rest going to the provincial government. Payments are due monthly and must be made within 45 days of production, with penalties for late payments.
The Gas Development Surcharge arises from the difference between the sale price for consumers set by the Oil and Gas Regulatory Authority (OGRA) and the prescribed price for gas companies, which includes their fixed return. The surcharge and royalty are inversely related: higher wellhead values lead to higher royalties but lower surcharges, and vice versa.
The Excise Duty on Gas, currently set at Rs. 10 per MMBTU, is collected by the Federal Board of Revenue (FBR) and transferred to the provinces.
Khyber Pakhtunkhwa has ten active oil and gas companies and was the first province to establish its own Provincial Oil and Gas Company (KPOGDCL) in 2013. This company, under the Energy and Power Department, aims to accelerate oil and gas exploration and production in the region.
This surge in revenue reflects KP’s growing role in the energy sector and underscores the province’s commitment to enhancing its industrial and economic landscape.
[11:40 am, 22/07/2024] Faisal. Daily Ittehad: FPCCI calls for a review of agreements with Independent Power Producers (IPPs) Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has called for an urgent review of agreements with Independent Power Producers (IPPs), warning that without a reduction in electricity prices, industries in the country could face shutdowns.
Sheikh highlighted that the government should disclose the terms of these agreements, which he claims are contributing to high electricity costs in Pakistan. He pointed out that the country is paying Rs. 150 billion monthly to IPPs that are generating less electricity than expected.
Sheikh noted the troubling rise in circular debt within the power sector while the public endures the burden of expensive electricity. He criticized the fact that some IPPs are operating at less than 10% capacity but still receiving full payments. This, he argues, is making life increasingly difficult for ordinary citizens and businesses due to the high cost of electricity.
Sheikh emphasized that electricity prices in Pakistan are significantly higher compared to neighboring countries, adding that if costs are not reduced, the country’s industries may be forced to shut down. He has also called for a forensic audit of the IPPs to address these issues and find a path forward.
