Captive Power Plants: APTMA requests govt to revisit its gas moratorium decision

ISLAMABAD: All Pakistan Textile Mills Association (APTMA) has approached Prime Minister Imran Khan requesting him to reverse decision on moratorium of gas for Captive Power Plants (CCPs).

According to the government’s decision, gas supply to CPPs will be disconnected from March 15, 2021.

APTMA argues that a substantial number of mills have both gas and electricity connections while their power requirements are over Rs 5 MW. The additional loads are met through gas-based generation as the grid power alone is insufficient.

Recognizing this problem, Nepra recently allowed enhancement of load limits on B3 industrial connection from 5 MW to 7.5 MW without the installation of a new grid. Discos have refused to accept this decision of Nepra’s.

Furthermore, many of our members have applications for enhancement of load pending with the DISCOS. Most have even paid for enhanced loads. Discos are not willing to acknowledge inability to supply or give in writing the pendency of the applications while SNGPL and SSGCL require such certifications in writing from the DISCOs to avoid disconnection on March 15 2021.

APTMA has requested that the decision be urgently revisited as the gas supply is scheduled to be disconnected on March 15, 2021.

The policy of suspending gas/RLNG supply to CPPS is discriminatory; the integrated textile units (very few in numbers) will continue to get gas/RLNG while the entire SME sector will not. The SME sector employs 70% of the industrial labour and this action will result in 40% enhanced cost of conversion as the SMEs will be forced out of business.

The assumption of 3,000 MW additional load on the grid is not correct as the total gas consumption by the CPPs is 450 mmcfd out of which 350 mmcfd is consumed in co-generation units while only 100 mmcfd is used by CPP's for power generation only. The estimated quantity of gas that will be disconnected as a result of this policy is approximately 100 mmcfd, as most of the industrial units are already operating on a cogeneration basis.

The disconnection of gas will temporarily shift a load of 350 MW to the grid as all the units will ultimately convert to cogeneration. The very small additional temporary load gain on the grid is not significant enough to justify risking the sector's growth momentum.

APTMA said that the gas moratorium policy was formulated and approved without stakeholder consultation and definition of cogeneration or efficiencies. This has caused a lot of confusion and uncertainty in the industry.

APTMA’s letter states that grid electricity is not of the quality that can run sensitive electronic equipment. The recent example of several units switching from gas/RLNG to grid to avail the incentive of lower marginal rates has been reversed by nearly all units as the loss of production due to the variation in the electricity has been a far heavier cost than the lower electricity rates.

Major expansion of the Textile Sector has been jeopardized as all new equipment and feasibility was based on sustained gas/RLNG supply at regionally competitive rates to provide stable and reliable power.

The bigger groups/industries have coal and HFO based CPPs installed and even if gas/RLNG is denied will continue to operate on captive generation for the reasons elaborated above. This will further exacerbate the divide between the integrated/big-boys and the SME sector.

There is ample room for misuse/corruption in this policy as pick and choose on who is eligible or not will be judgmental - the fact that some mills can claim that they are generating power but use the waste heat for steam can be interpreted in many shades and a further grey area is that mills can claim and that they cannot get power connections for exemptions from gas/RLNG disconnection. This will invite corruption both at the Discos and SSGC/SNGPL level.

A significant number of mills have recently invested millions of rupees in new gas/RLNG generation equipment based on meeting efficiency criteria as espoused by government.

The abrupt and ill-conceived change in policy will bankrupt these companies. The previous decision of CCOE to reduce the price of power to 7.5 cents to encourage mills to shift to the grid was not implemented, and the decision impose a gas supply moratorium for Captive Power of Export Oriented Units (EOUS) will result in an increase of over 10% in the final cost of export orders eroding competitiveness.

The Association says that given the past performance of the Power Sector and the frequent breakdowns/variation industry does not have faith that the Power Sector will be able to deliver on a sustained stable and competitive basis.

In order to maintain competitiveness, many of the companies are already installing new energy efficient generation and machinery and around $ 2 billion investment is in pipeline. The electricity from the grid has been inconsistent and unstable. Industry is experiencing significant production losses as a direct consequence of irregular supply of grid electricity. The latest machinery being used in the industry is equipped with electronics (electronic cards/chips) which are highly sensitive to electricity fluctuations. The cards/chips installed in the machinery burnout or trip if there are variations in frequency/voltage/supply of electricity, halting the entire production line. The industry experience of utilizing grid electricity hasn't been productive so far.

Apart from production losses, the capacity and performance of installed machinery is also compromised - adding further maintenance and repair costs. “The expansion and investments in the textile sector are a direct consequence of government’s policy of regionally competitive tariffs. The momentum gained by this effective and progressive policy will be lost if the decision on captive power is not reversed,” said Chairman APTMA, Abdul Bashir in his letter.

Copyright Business Recorder, 2021