EDITORIAL: The commotion over the decision of the cabinet committee on energy (CCoE) to discontinue gas supply to captive power plants (CPPs) for general industry from February 1 and for export-oriented sectors from March 1 was only to be expected. That is because it came just when producers were looking to produce more, to make up for recent losses of course, and the time given to them to adjust might not be enough given some of their deadlines. The textile sector, especially, is warning of dire consequences because it had just surprised everybody by receiving larger than usual international orders despite the global slowdown. And now industry representatives believe that unless the government takes a step back to reconsider the matter immediately, it could unleash a wave of shutdowns and job losses that could come back to haunt it. That the second round of the coronavirus is intensifying and the new round of lockdowns across the world could reach Pakistan anytime is only adding to everybody’s concerns.
These are of course very serious issues. And it’s not as if the ruling party has been going out of its way since the lockdown, trying to stimulate industry into producing and exporting more, just to pull the rug from under it. Yet, for all these concerns, the fact remains that the CPPs in question use gas to produce electricity and since we are facing an acute shortage of the commodity at the moment, it makes neither fiscal nor practical sense to press this issue any further with the government. That was precisely the thrust of the argument that the petroleum division used to get the CCOE to green light the gas moratorium. And since discovery of new gas reserves is nowhere near the depletion rate of existing supply, this is going to be a long-term issue that industry will just have to come to terms with. Besides, CPPs produce electricity from gas at a very inefficient rate of 30-38 percent, compared to IPPs’ rate of 50-62 percent, which makes asking for more like trying to hang onto a bad habit.
The problem is that while there is enough generation capacity for CPPs to shift to the electricity grid, the distribution and transmission systems are the weaker link in the system. So the government now faces a two-fold problem. One, there isn’t enough gas left in the country, and there isn’t enough being discovered fast enough, to keep feeding into CPPs anymore. And two, distribution and transmission networks need repair and overhaul for the transfer to the electricity grid to work smoothly. So the government must immediately begin working on a medium-term plan aimed at increasing and augmenting both distribution and transmission so industry can be weaned off its dependence on gas for its electricity needs. That way the excess generation capacity can be utilised very effectively and the gas saved can be put to more important use, so the sooner this transition can take place the better for everybody including industry.
These are very sensitive decisions so the government would have to put its best foot forward to handle them all in the right manner and at the same time. If the industry really faces the prospect of mass shutdowns when the gas is turned off, as some representatives are claiming very loudly, then the government must move with great speed and make sure that the jump from gas to the grid does not face any unforeseen and unnecessary problems. It is unfortunate but true that while previous governments paid a lot of attention towards enhancing power generation capacity – which their opponents claim was because that is where palms are more easily greased – they were indeed guilty of ignoring transmission and distribution. And unless this government can at least begin to right that wrong, it will leave the power sector pretty much as it found it.
Copyright Business Recorder, 2021
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