ISLAMABAD: Federal B, Area Association of Trade and Industry has sought the Finance Minister’s help to address the violation of the gas allocation policy by SSGCL, which is not only burdening the national exchequer with Rs 99,991 million per annum subsidy but also depriving the industry of cheap electricity.
In a letter to Finance Minister Ishaq Dar and other concerned stakeholders including Minister for Commerce Syed Naveed Qamar, the Association referred to the alleged violation of the gas allocation policy by Sui Southern Gas Company Limited (SSGC) and its impact on the people of Karachi in terms of electricity bills.
The Association has claimed that SSGC is in clear violation of the gas allocation policy, despite power sector (for Karachi, it is K-Electric) being placed at priority No. 2. The power utility company is not being supplied indigenous gas while influential owners of Captive Power Plants continue to receive 210 MMCFD of natural gas at OGRA approved rates of Rs 1100/MMBTU and 1200/MMBTU.
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This violation of the gas allocation policy has resulted in several adverse consequences. Firstly, KE is receiving approximately 70 MMCFD of RLNG, which has led to increased load shedding and extraordinarily high fuel adjustment charges for the 20 million residents and 25,000 industries of Karachi.
Additionally, there is a significant discrepancy in tariffs, with the Captive Units generating electricity at a cost of Rs. 14/kWh, while the rest of Karachi is being billed at Rs. 42/ kWh (March 2023 bill) due to the usage expensive fuels like imported RLNG by KE.
Moreover, the total tariff differential subsidy claim of K-Electric due to the usage of expensive RLNG and furnace oil from April 2022 to March 2023 was Rs 184,321 million.
“Had KE been given 135 MMCFD of natural gas as decided in 2018 the subsidy would have been reduced to Rs 84,410 million. This difference of Rs 99,911 million not only affects the Federal Government’s budget but also results in burning valuable foreign exchange through imported RLNG,” said the Association.
According to the letter, most of these Captive Power Units are highly inefficient and consume approximately 0.30 to 0.36 cubic meters of gas to produce 1 unit of electricity. In comparison, KE’s most inefficient plant, BQPS 1, consumes about 0.24 cubic meters of gas to produce 1 unit of electricity.
By diverting the same gas to BQPS 3, it would consume only about 0.13 cubic meters of gas to produce 1 unit of electricity.
The Association has also claimed that Captive Power Units hire top lawyers and obtain court stays to impede efficiency checks by the NEECA.
To address these pressing issues, the Association has submitted the following recommendations:(i) operate all RLNG-fired plants including KE’s plant on indigenous gas, which would reduce the impact of Fuel Cost Adjustment (FCA) on all industrial and residential customers; (ii) shift highly inefficient 749 Captive Power Units to the national grid that are generating more than 1300 MW. By doing so, the gas allocated to them can be redirected to more efficient power plants, resulting in cost savings and cheaper electricity for consumers and;(iii) instruct SSGC to strictly adhere to the priorities set in the Gas Allocation Policy 2005, amended in 2013 and 2018 which will ensure equitable distribution of gas resources and prevent undue advantages to certain industries at the expense of others.
The Association maintains that the GoP is already supplying RLNG to zero-rated industry @$ 9/ MMBTU, which would cost them approximately Rs 28/ kWh.
Additionally, raising the captive power category rate above the RLNG rate would encourage these units to switch to the grid leading to a reduction in capacity charges and freeing up 210 MMCFD of gas that can be utilized in the power sector to generate cheaper electricity. Also the quantity of electricity produced will also be double as RLNG plants are 100 per cent efficient compared to captive power units of private sector.
Copyright Business Recorder, 2023
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