The exporters have now resolved the gas supply issues as the understanding was reached between representatives of the federal government and the exporters, led by Pakistan Textile Exporters Association (PTEA) Patron-in-Chief Khurram Mukhtar. The government has conditionally agreed to restore gas supplies to the captive power plants owned by exporters after they consent to paying roughly 38% higher price for three months and conducting an energy efficiency audit.
Owing to the lack of gas and high prices of imported gas, the government and the exporters agreed to revise the existing gas tariff of $6.5 per million British thermal units (MMBtu) for the captive power plants of export sectors to $9 per MMBtu from November 15, 2021, to March 31, 2022. However, an industry official this month took a stay order from the court against the decision, although the lobby group had agreed to pay the higher price due to high LNG rates. In retaliation, the government suspended gas supplies.
The government functionary said that the gas supply would be restored from Wednesday on three conditions.
1. Firstly, no exporter will seek a stay order from any court against the pricing.
2. Secondly, the beneficiaries will ensure an energy audit by a third party before June 30, and no stay will be taken against the energy audit.
3. If an industrial unit fails to ensure the energy efficiency audit, its connection will be disconnected permanently with no remedy available.
The government had booked Rs26 billion in gas subsidy in the budget, which is now estimated to increase to Rs62 billion annually. Power subsidy costs another Rs20 billion per annum, and it is also unfunded, meaning that it adds to the circular debt. Due to increasing LNG prices, the cost of gas subsidies for exporters would have increased by another Rs35 billion had the government kept supplying gas at $6.5 per MMBtu. Therefore, it was inevitable to increase the gas prices. However, the export sector is also happy as the industry can run to its full potential to meet the orders.
