The government is making a mockery of itself in an effort to subsidize energy needs for textile exporting sector in Punjab to make it competitive to the regional exporters. The intent is right; but the execution is messy.
The Punjab industry till September 2018 was getting 22 percent of its gas from Sui system while the remaining 78 percent was allocated from imported RLNG - the system gas is at substantially low rates to imported RLNG. The industry norm was to use system gas for peak hours charge of grid electricity and use grid power for non-peak hours (majority of 24-hours).
By this mechanism, the average cost of energy was approximately Rs10.5 per unit. In an effort to reduce the effective rate, the ECC decided in Oct18, to allocate 300 mmcfd of gas to the industry with 50:50 ratio of system gas and RLNG. The industry was happy and they started using as much gas as they can by running captive power plants.
The industry prefers captive power plants over grid electricity as for latter there are breakages - on average, the grid system gets interrupted once or twice a day which causes unnecessary delays and costs. It is best to have the industry on the grid to dilute the impact of additional capacity payment for new plants.
The ideal solution is to immediately work on fixing grid transmission issues in clusters where industry operates in Punjab. While the industry is still using grid power for non-peak hours and is already taking brunt of grid breakages.
This column criticized the decision of supplying gas to the industry on the premise that there is a case of excess capacity at grid and government (in turn consumers) has to pay for capacity charge irrespective of usage of power. Thus, especially in winters, when the grid load is low and gas requirement is high, it is best to have Punjab textile industry on grid electricity. For details read “Gas or grid power to the exporters” published on 16th Oct 2018.
The idea is to not use inefficient captive power plants on gas and then subsidize them on top; rather a better mechanism could be to give system electricity at subsidized rates to the industry. Somehow, the recommendation was partially heard by a committee comprising of SNGPL and couple of ministry representatives.
Earlier this week, the committee notified that the industry will get 185 mmcfd of gas with no allowance for operating captive power plants. However, the petroleum ministry or other relevant key government representatives have no clue of what is the rationale behind the committee thought process.
What is the rationale for 185 mmcfd? The gas is either used to run power for spinning and weaving and for producing steam in value addition. According to industry sources, the processed gas use is mere 45 mmcfd. And even for that, most of the companies are using combined cycle plants which are best to operate either only on gas or solely on system power.
A very few firms have independent steamers which can be used on gas while the rest of production can rely on system electricity. Hence, if the gas is not allowed to be used for captive power generation, for most of the industry, the gas is of no use for dying and other processes.
Meanwhile the textile players, based on ECC decision, stopped using grid power and were totally relying on gas, if they could. But to add to their misery, the gas in October was billed solely based on RLNG i.e. Rs17.5 per unit on prevailing market rates.
This is a comedy of errors, where not only industry but the government is worse off too in the process. The industry does not know what to do - whether to use gas or grid power or a combination of both. The government officials have nothing concrete to say as there is an ECC decision notified by OGRA which is not implemented and then there is a committee notification which cannot overrule the ECC decision. This is of lack of technical capacity in key government departments and more importantly, it is due to poor coordination amongst various government departments. The need of building capacity in energy chain and the need to have one power regulator cannot be overemphasized.
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