By SKM
January 30, 2024
ISLAMABAD: The textile industry has asked the government to ensure operationalizing the private power market —- Competitive Trading Bilateral Contract Market (CTBCM) with multi sellers and buyers model at the earlier with minimum wheeling charges of 1-1.5 cents per unit so that the industrial activities could gain momentum.
In a letter written on January 28, 2025, to Mr Momin Agha, Secretary Petroleum, All Pakistan Textile Mills Association (APTMA), also suggested that the framework must avoid extraneous costs such as cross-subsidies and stranded costs that are unrelated to CTBCM consumers.
APTMA in its correspondence also proposed the government to allow the textile sector to directly import 100 mmcfd of LNG and novate another 100 mmcfd of government-contracted LNG with Qatar, along with associated terminal and pipeline capacities, to the industry. This would ensure a reliable and affordable supply of energy for captive power generation, relieving the government of this burden as well as surplus LNG contracts.
The gas-fired power generation also has a relatively lower carbon footprint compared to other sources of electricity which will support the sector in meeting net-zero targets and complying with upcoming regulations like the EU’s Carbon Border Adjustment Mechanism (C-BAM). APTMA says that it stands ready to execute this initiative immediately and without any subsidies or financial support from the government, aligning with oft quoted free-market principles advocated by multilateral agencies and the government itself
Enabling the textile sector to source clean, competitively priced electricity through B2B contracts is crucial, especially in light of Pakistan’s net-zero commitments and upcoming international regulations, such as the EU’s C-BAM.
These policies necessitate low-to-no carbon emissions during production to maintain competitiveness in international markets. While Pakistan’s generation mix is relatively clean due to significant hydel generation capacity, the electricity that is actually generated has relatively higher carbon emissions due to seasonal intermittency and low utilization of hydel sources, further necessitating B2B power contracts for clean and consistent electricity.
The letter also further says that the government agencies have failed spectacularly in ensuring the continuous and affordable provision of energy for the export-oriented textile sector, causing significant operational disruptions and unsustainable cost increases that have placed the industry in a position where their products are uncompetitive in the international market.
Over the past two years, energy costs have surged to untenable levels. Current power tariffs range from 13-16 cents/kWh, compared to 5-9 cents/kWh in competing economies. It is important to note that grid tariffs include cross-subsidies, excessive transmission and distribution losses of the grid, and others costs associated with billing, administrative and operational inefficiencies of the DISCOS that are over and above the cost of service for industry and cannot be exported to international markets. Energy, which accounted for around 35% of conversion costs in spinning two years ago, now represents up to 55%, making cost-effective production impossible. Consequently, export growth has stagnated, upstream units have closed operations, and unemployment has risen alarmingly.
The unreliability of the national grid exacerbates these challenges. Frequent outages and fluctuations damage sophisticated machinery, further inflating costs and disrupting production. To mitigate these risks, many textile units have invested in high-efficiency captive power plants, particularly gas-fired combined heat and power (CHP) systems that maximize gas utilization. However, the unprecedented increase in gas prices from Rs. 1,100/MMBtu to Rs.3,500/MMBtu-has rendered even this efficient mode of power generation unviable, with costs exceeding 14 cents/kWh, comparable to prohibitive grid electricity rates.
“This energy crisis has become a significant barrier to export growth, global competitiveness, and economic stability.” Ends
