ISLAMABAD: Commerce Minister Jam Kamal Khan is said to have come forward to rescue over 100 Captive Power Plants (CPPs), saying their efficiency is better than Independent Power Plants (IPPs) and KE’s plants with a request to the prime minister to direct the Petroleum Division to devise a criterion for audits of energy efficiency of captive plants of export sectors based on global standards and continue the supplies of gas/RLNG to the complaint captive plants subject to the certification from authorised third-party auditors, well-informed sources told Business Recorder.
The commerce minister, sources said, has praised the prime minister for addressing the issues of export sectors to reduce their cost of manufacturing, keeping them internationally competitive, and boost national exports in the backdrop of a challenging global business environment.
The prime minister has most recently announced an industrial electricity tariff of Rs34.99 per kWh (all-inclusive) with the exclusion of the burden of cross-subsidies on industrial consumers which will definitely help them to maintain export competitiveness and regain lost share in global trade, once notified by the NEPRA subject to the approval of the federal cabinet.
Captive power units: MoC opposed to increase in gas rates
Kamal, in a letter to the prime minister, has also brought into the attention of the prime minister a critical issue, which according to him, may have severe socio-economic repercussions as well as it may shoot up circular debt of the gas/RLNG sector.
The commerce minister is of the view that the Petroleum Division on June 29, 2024, submitted a summary to the Economic Coordination Committee (ECC) of the Cabinet with a proposal to revise the indigenous gas tariff for industry (captive power) from Rs2,750 to Rs3,000 per Mmbtu while highlighting the facts that “captive power sector contributes significant portion of gas and RLNG consumption at higher rates and thus not only provide additional revenues for cross subsidies in domestic sector in the absence of budgeted subsidy but also consumes LNG which often become surplus due to erratic off-take of power plants.”
The summary was approved by the ECC of the Cabinet on June 30, 2024.
Kamal, in his letter, has further argued that within the last two years, gas/RLNG blended tariff of industry (captive power) has been increased by approximately 90 per cent on the SNGPL network (from $9 to 13.6) and 175 per cent on SSGCL network (from $5.4 to 11.8).
“Abrupt changes in tariffs have therefore adversely impacted competitiveness of the industry, as the regional competitors are offering the gas/RLNG on an average tariff of US$ 9. Further, there is unpredictability of Gas/RLNG tariff in Pakistan due to the frequent changes in blend ratio by the Gas companies on a regular basis,” he added.
Importantly, as per the consumer data received from the Petroleum Division and PRAL database, it is observed that 349 companies having 49 per cent of total gas/RLNG connections (i.e. 523 of 1,078 connections) contributed $13.3 billion in FY22, Kamal continued.
According to the commerce minister as per the NEPRA and industrial survey conducted by the Ministry of Commerce, the captive plants of export industries are found comparatively more efficient than those of Generation Companies (GENCOs), Independent Power Plants (IPPS), K-Electric and its IPPs.
A comparative analysis is as follows Genco- 38.36 per cent, KE and its IPPs (10) 40.39 per cent, IPPs (30) 45.28 per cent and export industry–captive (109 plants) 62.70 percent.
Additionally, the Petroleum Division has indicated in the summary for the ECC of the Cabinet that the captive power plants of industry will be phased out of the gas grid by January 2024 as per recent meetings held with the IMF. It is therefore anticipated that the exports of industrial manufactured sectors will be declined resulting in the loss of foreign exchange, employment, services and revenue to the FBR.
The commerce minister has proposed that for the socio-economic development and growth of the country, it is imperative that the prime minister of Pakistan may kindly direct the Petroleum Division to: (i) devise a criterion for audits of energy efficiency of captive plants of export sectors based on global standards and continue the supplies of gas/RLNG to the complaint captive plants subject to the certification from authorized third-party auditors;(ii) remove the burden of cross-subsidies on the export sectors and;(iii) supply of gas/RLNG to export sectors on regionally competitive tariff and fixation of blend ratio or RLNG and indigenous gas for the predictability of tariff instead of frequent changes by the gas companies.
Copyright Business Recorder, 2024
Comments
Comments are closed.