By SKM
January 28, 2025
ISLAMABAD: In a new development, the export and non-export industry having captive power plants (CPPs) has asked the government to send them gas disconnection notices as it will no longer be able to bear the imposition of levy on new gas price of Rs3500 per MMBtu notified by OGRA on the directives of the government.
The industrialists from southern and northern parts of the country have refused to run their industrial units if the government imposes a levy on the new gas tariff for CPPs. They instead asked the government to deregulate the LNG sector and let them import LNG for captive power plants. They also desired to arrange the gas supplies for CPPs under the amended E&P policy 2012 which allows the private sector to purchase 35% of the gas from exploration and production companies.
This has been conveyed to Petroleum Minister Dr Musadik Malik and top officials in a meeting held here on Tuesday. The business tycoons from the south and north of the country attended the meeting. Some were present in person and some attended the meeting through zoom and skype links.
“If the levy is imposed, then the tariff would further increase by Rs800-2500 per MMBtu depending upon how efficient captive power plants. This will not be simply acceptable for the industry,” a top official was part of the meeting told Exclusivewaves.com.pk.
However, the government wants industrialists to pay more than Rs3500 per unit in the shape of 5-18 percent levy. The government is under pressure because of its undertaking to the IMF that it would disconnect the gas supplies from CPPs by January 31, 2025, and connect the industry to grid electricity. As an alternative, the government wants the industry to pay the gas price at the cost of the one unit of electricity which is generated with the consumption of gas worth Rs3700.
Former APTMA chairman and eminent businessman Asif Inam confirmed that the industry rejected the levy on the gas tariff for CPPs. He also emphasized the need for the government to deregulate the LNG sector, allowing them to import LNG and use it for captive power plants. Asif Inam said the government is creating obstacles to obtaining gas from E&P companies through third parties, even under the amended E&P Policy 2012. He also said that while the government is not ensuring a reliable supply of grid electricity without interruptions or fluctuations, it insists on imposing the levy on the newly increased gas tariff of Rs3,500 per MMBtu for CPPs. He said that the government had already raised the natural gas tariff to match the price of RLNG. “If the government wants to impose a levy on the tariff, it would be better to disconnect CPPs from the gas supply,” he said.
“The levy on new gas price will serve nothing, but to dis-incentivize captive power generation and push industries towards the national grid. The reliance of the textile sector on gas-fired captive power generation is driven by operational reliability and cost-efficiency requirements, neither of which can currently be met by the national grid.”
Industry warned that the proposed shift to the grid will escalate production costs and disrupt industrial operations, resulting in significant export losses of $3-6 billion per annum and up to 3 million job losses in the immediate aftermath, and undermining the industry’s international competitiveness and long-term sustainability.
“At present, electricity from the grid is priced at 13–16 cents/kWh, significantly higher than the rates in competing economies like China, India, Vietnam, Bangladesh, and Uzbekistan, where electricity is available at 5–9 cents/kWh.” “So Industry is left with no option but to arrange its gas supplies under a deregulated regime and BtB RLNG business model,” Industrialists are quoted as saying.
Industrialists in the meeting said that their gas tariff, according to their data, has already reached up to Rs3700 per MMBtu. The government asked the industry to provide their data for examination purposes and also desired to carry out their audit to know which captive power plant is efficient or not. In the meeting, the Petroleum Minister desired to visit Karachi and Lahore to have meetings of the business tycoons on the issue of imposition of levy on gas price of Rs3500 per MMBtu.
However, the industrialists said that they would not pay gas price more than Rs3500 per MMBtu in the shape of imposition of levy by the government and underscored the government’s functionaries to let it import LNG and use the distribution and transmission infrastructure till it manages to purchase the local gas from E&P companies through the third party at the auctioned prices which has been allowed under the amended E&P policy 2012. Ends
