Gas tariff for captive power plants: Proposed hike to have serious consequences on export-oriented sectors

The proposed increase of 31 percent in gas tariff for captive power plants would have serious implications on the productivity of five leading export oriented sectors.

Various exporters and industrialists while talking to Business Recorder flayed the proposed increase in gas tariff and announced that they would raise the issue with Oil and Gas Regulatory Authority (OGRA), failing which they would challenge it in high court.

OGRA has proposed to increase gas tariff from Rs 786 to 1,033.99/mmbtu for registered manufacturers/exporters of five sectors and their captive power plants namely textile, carpets, leather, sports and surgical goods.

They further stated that if the tariff increase is implemented gas tariff would have been raised by around 200 percent for the industrial sector during the fifteen and a half months of the five year tenure of the Pakistan Tehrik-i-Insaaf government. The new gas tariff would increase the input cost manifold rendering Pakistani products uncompetitive in regional markets, they added.

Shahid Sattar, executive director of All Pakistan Textile Mills Association (APTMA) concurred and said that the proposed increase in gas tariff would not only lead to a decline in output but would also fuel inflation.

Sattar further said that Unaccounted for Gas (UFGs) is 12 to 14 percent or around $2 billion per annum, and claimed that nobody is paying attention to this issue. He further said that no significant effort is being made to incentivise domestic exploration, and hence demand supply gap is widening.

Chairman Pakistan Readymade Garments and Manufacturers and Exporters Association (PRGMA) Ijaz Kokar said that gas supply is essential for textile dyeing industry and the increase in tariff would hit the entire chain of value added textile sector. He further said that the proposed increase in gas tariff would affect the production of value added products and exports.

Kokar further said that increasing input costs is contrary to the government's claim of facilitating small and medium enterprises as well as overall industry. Owing to depreciation of local currency, imports of essential raw materials for value added sectors became expensive by 25-30 percent and the proposed increase in gas tariff would further increase the input cost rendering Pakistani products uncompetitive in international markets, he added.