SNGPL tasked to curb misuse of soft gas tariff by industry

LAHORE: Petroleum Division has asked Sui Northern Gas Pipelines Ltd (SNGPL) to eliminate misuse of concessionary natural gas tariff, if any, by export-oriented industry to ensure efficient use of the gaseous fuel, The News has learnt.

According to a letter dated November 30, 2021, written by DG Gas, Petroleum Division, Ministry of Energy, to Managing Director SNGPL, the former stressed on the latter that to implement the decision of the Federal Cabinet for achieving desired objective of efficient gas/RLNG use, certain steps should be taken for eradicating misuse of concessionary tariff.

In this connection, SNGPL has been advised to take steps for maintenance of regional database of export units (process and captive) in addition to monitoring of consumption pattern fortnightly by industrial units with a view to determining gas usage by both -process and captive.

Moreover, the ministry also asked the gas utility to take steps for monitoring and reporting of captive units’ switchover to power grid through surveillance system including liaison with power distribution companies (DISCOs), inspections, and other desirable measures. SNGPL was further asked to ensure proper verification of record at regional and head office level before processing subsidy claims.

The letter titled ‘Revision in tariff of gas/RLNG for export-oriented sector’ referred to decision taken by the Federal Cabinet in its meeting held on November 09, 2021 vide Case No. 1075/37/2021, while considering a Summary submitted by the Petroleum Division. As per cabinet decision, existing tariff of $6.5/million British thermal units (mmBtu) for Captive Power (self-power generation including cogeneration) use in export sectors is revised to $9/mmBtu with effect from November 15, 2021 to March 31, 2022. Moreover, existing tariff of $6.5/mmBtu will continue to be provided to export sector for gas/RLNG usage in processing general industrial use only.

It may be noted The News had reported on these pages on November 13, 2021 the federal government had decided to increase gas tariff for textile units by 38.46 percent to $9/mmBtu from present $6.5 from November 15, 2021 for three and half months, which was dubbed by industry as a setback for export-oriented units.

According to a study, subsidised energy rates are vital for the domestic textile sector’s competitiveness in the backdrop of much-hyped regionally competitive energy tariffs.

The economic significance of the textile sector in Pakistan is undeniable as it enjoys a lion’s share in country’s exports. The sector contributes over 60 percent in the total export earnings and provides employment to around 40 percent of the labour force.

The recent outshining performance of the textile sector can partially be attributed to the Regionally Competitive Energy Tariff (RCET) policy, adopted by the government in late 2018. Under the RCET policy, the government offers a regionally competitive RLNG/gas tariff at the rate of $6.5/mmBtu, beside similar concessional power tariff.

In August this year, the present government extended a mix of local gas and RLNG to export-oriented industry throughout the country.

Decision in this connection by the Economic Coordination Committee (ECC) of the Cabinet extended subsidised flat electricity and gas rates to the export sector for another year. However, keeping in view record high LNG rates in the international market, the government is now unable to bear the additional cost of imported natural gas and has thus decided to pass on its financial impact on the export-oriented industry.