Commerce Division has floated a proposal for the Economic Coordination Committee of the Cabinet for change in economic merit order for power plants aimed at rationalization of imported fuel to contain trade deficit, well-informed sources told Business Recorder.
Commerce Division, in its summary, has stated that the country' s exports have started following a high growth trajectory of more than 11% year-on-year basis, since June 2017 and are expected to continue on the track during 2018. Commerce Division expects a 15 per cent increase in exports in February 2018 which is considered a big achievement of incumbent team. Commerce Division has also proposed that the supply of imported LNG for captive power generation may be disallowed, at least till the time the imported fuel prices come down resulting in improvement in the current account position.
Commerce Division, headed by Secretary Younus Dagha, maintains that while current growth in exports is going to contribute a substantial amount of $2-2.5bn during the current fiscal year, the higher growth in imports is widening the trade deficit.
"Some of the main reasons for this widening gap are the increase in prices as well as the quantum of imports of fuel and palm oil as well as of machinery and raw materials," the sources said, adding that while the import of new fuels such as coal and Liquefied Natural Gas (LNG) has improved the energy situation in the country, the increasing international fuel prices have posed another difficulty to an already challenging situation.
According to Commerce Division, this is a transitory situation, which will pay-off through better results in industrial and export growth, but still requires an immediate policy response to keep it within manageable limits. If left unchecked, it will cost a huge outflow of foreign exchange before the economy is able to reap the benefits.
Since a large quantity of imported fuels LNG, coal and Residual Fuel Oil (RFO) are used in power generation, their use can be effectively limited to essential requirements for meeting power deficit. This would require adjustment in the modality of formulating merit order list for power dispatch by NTDC.
Commerce Division has proposed that dispatch order may be adopted for the merit order list, which will keep the use of imported fuels within sustainable limits, meeting the objectives of energy security without compromising the objective of eliminating power deficit.
The proposal says first priority should be given to those non-fuel plants - ie hydel, wind and solar - with take or pay Power Purchase Agreement (PPA) whereas second priority may be given to plants which are run on local fuels ie coal, gas, nuclear and bagasse.
Third priority has been proposed for plants which operate on imported fuels like RLNG, coal and RFO while fourth priority has been given to those hydel, wind and solar projects which have PPAs on take and pay basis. Fifth and sixth priority has been given to coal, gas, nuclear, bagasse(on local fuel) and LNG, coal and RFO (imported coal) which have take and pay PPAs. Commerce Division has proposed that the availability of sufficient power supplies warrants that the industry be encouraged to use more power from the grid to improve financial position of the power sector.
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