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Saturday, February 24, 2024

Gas and power dilemma in Pakistan

The textile sector of Pakistan is on edge as it is operating on gas supplies in Punjab on higher imported gas elements and erratic supplies in Sindh as the imported gas component is low and domestic supplies are down.

Grid power is available to the textile sector 24/7, and the government ensures no load shedding for the industry. Still, both Sindh and Punjab prefer gas because, despite the addition of RLNG in their gas mix, producing power through gas is cheaper than grid power. The rate of grid power exceeds Rs40 per unit, which mills cannot afford. It was announced in December that the ratio of domestic gas in Punjab would be zero from the first of January. However, gas supply in the ratio of 65 percent RLNG and 35 percent domestic gas continues as half of January has passed. The decline in the domestic gas ratio has increased the generation cost in Punjab, but the millers are still happy. They shudder at the prospect of shifting to grid power as production of the current tariff.

Recently, a part of the media quoted Minister for Commerce and Industry Ejaz Gohar from Egypt, who said that the government will reduce the power tariff for the textile sector to 9 cents from 14 cents. However, the industry players have mostly received no indication, while power sector sources deny such an arrangement. They pointed out that the subsidy cost would be very high. The government does not have fiscal space to provide the subsidy.

The industry players have already been told that the government is not in a position to annoy the IMF, whose support is needed for another few years. The caretaker government, they added, took difficult economic decisions to ensure that the country remains aligned to the current IMF program that will continue till the formation of the new elected government. After the completion of this program, the new government would be constrained to go for another IMF program. The experts also pointed out that had this announcement come from the Minister of Energy, it might have carried some weight.

The textile sector in Sindh has issues with the gas supply ratio. Previously, they were getting 100 percent system gas, which was very cheap. Still, now they get 65 percent system gas and 35 percent RLNG, increasing their tariff substantially because the imported RLNG is very expensive. The industry leaders are vehemently protesting the induction of RLNG in their supplies. The power produced by Sindh-based mills from the current mixture of gas supplied to them still costs less than the power that Punjab-based mills get from the gas mixture supplied to them. Still, the cost of power for Sindh-based mills has almost doubled. Moreover, they are frequently subjected to suspension of supplies for one to two days a week and have to either shift to grid power or close the mills.

Since gas supply to textile mills was very cheap, many have installed inefficient gas generators. For them, the production cost exceeds that of power produced by Punjab-based efficient mills on 65 percent of imported RLNG. The power produced by inefficient gas generators of Punjab-based mills is still higher. The Energy Ministry is considering warning mills producing power from inefficient gas generators to update their technologies within a specified time.

Only some mills in the country have gas load sanctioned. They are sporadically operating. 

The textile sector of Pakistan is on edge as it is operating on gas supplies in Punjab on higher imported gas elements and erratic supplies in Sindh as the imported gas component is low and domestic supplies are down.

Grid power is available to the textile sector 24/7, and the government ensures no load shedding for the industry. Still, both Sindh and Punjab prefer gas because, despite the addition of RLNG in their gas mix, producing power through gas is cheaper than grid power. The rate of grid power exceeds Rs40 per unit, which mills cannot afford. It was announced in December that the ratio of domestic gas in Punjab would be zero from the first of January. However, gas supply in the ratio of 65 percent RLNG and 35 percent domestic gas continues as half of January has passed. The decline in the domestic gas ratio has increased the generation cost in Punjab, but the millers are still happy. They shudder at the prospect of shifting to grid power as production of the current tariff.

Recently, a part of the media quoted Minister for Commerce and Industry Ejaz Gohar from Egypt, who said that the government will reduce the power tariff for the textile sector to 9 cents from 14 cents. However, the industry players have mostly received no indication, while power sector sources deny such an arrangement. They pointed out that the subsidy cost would be very high. The government does not have fiscal space to provide the subsidy.

The industry players have already been told that the government is not in a position to annoy the IMF, whose support is needed for another few years. The caretaker government, they added, took difficult economic decisions to ensure that the country remains aligned to the current IMF program that will continue till the formation of the new elected government. After the completion of this program, the new government would be constrained to go for another IMF program. The experts also pointed out that had this announcement come from the Minister of Energy, it might have carried some weight.

The textile sector in Sindh has issues with the gas supply ratio. Previously, they were getting 100 percent system gas, which was very cheap. Still, now they get 65 percent system gas and 35 percent RLNG, increasing their tariff substantially because the imported RLNG is very expensive. The industry leaders are vehemently protesting the induction of RLNG in their supplies. The power produced by Sindh-based mills from the current mixture of gas supplied to them still costs less than the power that Punjab-based mills get from the gas mixture supplied to them. Still, the cost of power for Sindh-based mills has almost doubled. Moreover, they are frequently subjected to suspension of supplies for one to two days a week and have to either shift to grid power or close the mills.

Since gas supply to textile mills was very cheap, many have installed inefficient gas generators. For them, the production cost exceeds that of power produced by Punjab-based efficient mills on 65 percent of imported RLNG. The power produced by inefficient gas generators of Punjab-based mills is still higher. The Energy Ministry is considering warning mills producing power from inefficient gas generators to update their technologies within a specified time.

Only some mills in the country have gas load sanctioned. They are sporadically operating. 

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