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The government decision to disconnect 400mmcfd gas, being provided to captive power plants, and divert it to IPPs to reduce loadshedding on interim basis does not bode well for cement, textile, sugar and chemical sectors, an analyst said. "I believe that the recommendation of the cabinet committee on energy would be on a short-term basis to reduce mounting power shortfall in summers," Farhan Mahmood, senior analyst at Topline Securities said.
Currently, besides grid stations, most of the big listed companies rely on in-house electricity generation via captive power plants which are mostly run on gas. "The cost of power generation of these plants is 30-35 percent cheaper than the national grid electricity," he said.
He said that after the gas suspension most of the captive industries would rely on furnace oil as a backup fuel and thus facing higher cost of generation. "The possible decision bodes negative for cement, textile, sugar and chemical sectors unless they pass on the impact to consumers," he added. In the cement sector, few companies rely mostly on gas (Lucky) while some rely mainly on national grid (Kohat, Lafarge etc) while others depend on both, he said.

Copyright Business Recorder, 2012

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