Ban on gas supply to general, export industry on the cards

ISLAMABAD: In an unexpected development, the Energy Ministry is all set to disconnect the imported and local gas supply to captive power plants meant for both export and non-export industry from February 1 on a permanent basis.

And to this effect, top relevant officials of both the Petroleum and Power Divisions of the Energy Ministry have prepared a summary seeking moratorium on imported and local gas supply to industrial units for self generation of electricity from February 1 that is to be pitched in the ECC meeting. As per the contents of the summary of which copy is available with The News, the supply of natural gas will be discontinued from February 1 to all industrial units that are currently using it as fuel for the primary purpose of electricity generation for self consumption. The summary discloses that those industrial units that are currently using natural gas as fuel for the primary purpose of electricity but are not connected to the national electricity grid will be actively encouraged and expected to apply for new connection from the relevant DISCO as soon as possible. “This policy will be applicable to all industries including those classified as zero-rated (export industry) across Pakistan both on gas and RLNG,” the summary says. However, some of the officials have feared that the move will get scuttled in the ECC meeting as the government's priority policy is to encourage the export industry to earn dollars for the cash-strapped country like Pakistan. "Prime Minister Imran Khan is very sensitive about the export industry as he deems that the growth in exports is only the key to bail out Pakistan from economic miseries."

Shahid Sattar, executive director of All Pakistan Textile Mills Association (APTMA), when contacted, said the move of the Energy Ministry will prove detrimental to the industrial activities that have just picked up the momentum as the moratorium on RLNG and local gas supply to captive power plants meant for export industry will cause a 50 per cent increase in production cost owing to which the export products in international market would no more be competitive that will result in decline in exports of the country. He said the export industry is in process of expansion and the country is now on the way to industrialization, which was in the mode of de-industrialization some two and a half years back. More importantly, the industry has now started importing power plants having high efficiency, but, unfortunately, the government is going to place ban on gas to captive power plants.

He argued that captive power plants are indispensable for the export industry as the electricity generated from CPPs does not fluctuate which is imperative for delicate textile machines. He said the electricity that comes from the national grid is not of the quality that the textile industry needs, arguing that the national grid electricity has too many fluctuations, which is why the production suffers a lot. He referred to NEPRA reports which say that one fluctuation causes 4-5 hours closure in production of textile products.

The officials of the Energy Ministry are of the view that the country currently possesses the installed capacity to generate electricity more than 37,707 MW and more electricity generation capacity of 12,464 MW is in the pipeline. However, out of the 37,707 MW installed capacity, the de-rated capacity stands at 29,000 MW. With plenty of electricity in hand, the continued supply of precious depleting resources to CPPs doesn’t appear to be a rationale, which cannot match the efficiency of gas/RLNG-based IPPs in the national grid. During the peak summer season, the maximum utilization of electricity stands at 23,000-25,000 MW, which tumbles to 12,000-13,000MW in the winter season and sometimes reduces to 8,000-9,000 MW. The official said the government is facing the biggest challenge of capacity charges payments and wants the industry to use electricity at the maximum and not generate electricity based on gas. The government is already extending electricity to the industrial sector with a discount of 25-50 per cent on incremental increase in consumption of electricity from November 1, 2020 up till June 2021. That industrial tariff is being financed by COVID-19 Relief Fund. The government has also scratched down the peak hour tariff for the industrial sector. From November 1, 2020, the power tariff for Large Scale Manufacturing (LSM) is available at reduced tariff at Rs 12.9 per unit from Rs 18 per unit and for Small and Medium Enterprises (SMEs), the tariff is enforced at Rs 8 per unit which was earlier at Rs 16 per cent.

The capacity charges payment trap has aggravated and the government has to pay in this financial year a whopping Rs 900 billion to the IPPs under the head of capacity charges, which will alarmingly swell to more than Rs 1,600 billion in 2023, as more power projects will come on stream by that time.