Gas prices for power sector slashed by 35 percent

The government has slashed gas prices for the power sector by about 35 per cent to Rs 400 per MMBTU from Rs 613 per MMBTU aimed at eliminating price disparity and reduce electricity generation cost. Official sources told Business Recorder that the ECC in its meeting on November 25, 2016 while considering its summary regarding "revision in gas sale prices" took the following decisions:
(i) a reduction in gas sale price for industrial sector and captive power from Rs 600/MMBTU to Rs 400/MMBTU; (ii) in accordance with Fertilizer Policy 2001, the industrial sector gas sale price will also be applicable to fertilizer sector (fuel stock); and (iii) General Sales Tax would be charged @ Rs 100 per MMBTU on the gas sale price for the aforesaid consumers.
Presently, the generation cost of electricity through gas-fired power plants was around Rs 5.5 per unit, which would further reduce the cost of electricity. Ministry of Petroleum & Natural Resources, sources said, recently informed a high-level meeting presided over by the Finance Minster that due to a shortage of gas in the country especially on SNGPL system, the decision had created a disparity between the consumers of SSGC system and SNGPL system. Most of the consumers on SNGPL system were using RLNG which was being priced under ring fenced arrangement resulting in full cost recovery which as per latest notification of PSO was $9.7338/MMBTU inclusive of GST. As a consequence of that decision, the differential in cost of production of customers on SNGPL system versus SSGC customers has widened which was being agitated by the industrial consumers on SNGPL system who were seeking level playing field.
Ministry of Petroleum and Natural Resources proposed that the decisions of November 25, 2016 may be revised in order to eliminate price disparity and reduce electricity generation cost in the country in the following manner: (i) a reduction in gas sale price for power stations and Independent Power Producers (IPPs) from Rs 613/MMBTU to Rs 400/MMBTU; and (ii) General Sales Tax would be charged @ Rs 100 per MMBTU on the gas sale price for the aforesaid consumers.
The meeting discussed the one page summary of the Petroleum Ministry prepared after a meeting between the Minister for Petroleum and Natural Resources and All Pakistan Textile Mills Association (APTMA) and approved a reduction in gas prices for the power sector and IPPs along with the industry.