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ISLAMABAD: The government is likely to revise RLNG tariff of $6.5/MMBTU to discourage rent seeking nature of Captive Power Plants (CPPs) besides limiting gas/RLNG supply.

This was the crux of a discussion at a meeting of committee constituted by prime minister under the chairmanship of finance minister. Secretary Petroleum made a brief presentation wherein he informed the committee about the approved gas supply priority order which places export sector, including its captive power units, as second priority alongside with power and fertilizer.

He presented the data related to number of CPPs, estimated gas requirements/load and applicable tariff on SSGCL and SNGPL network, according to which total number of captive (export) and captive (non-export) are 1,218 that require a gas load of 403 MMCFD. The tariff of captive (export) is Rs 819 per MMBTU and captive (non-export) Rs 1087 per MMBTU.

Secretary Petroleum noted that Petroleum Division with the approval of Cabinet Committee on Energy (CCoE) in June, 2020 approved guidelines for conducting energy efficiency audit of the CPPs up to 50 MW and above 50 MW capacities while the task of efficiency audit was assigned to NEECA; however, the CPPs got stay orders against the efficiency audit.

Secretary Petroleum stated that in January, 2021 CCoE decided that gas supply to CPPs (non-export) having sufficient electricity will be disconnected by February 1, 2021 whereas gas supply to CPPs (export) having sufficient electricity load shall be disconnected by March 15, 2021.

However, before the Sui companies could proceed with disconnections, after consulting with the respective power Disco for sufficient loads, the CPPs began litigation and got stay orders against disconnection of gas supplies.

RLNG issue: expect another winter of gas shortages

He informed the committee that given the stipulations made in Article 158 of the Constitution, 1973 it is difficult for SSGCL to disconnect gas supply to CPPs in Sindh and same is the case for SNGPL in Khyber Pakhtunkhwa.

Shahid Khaqan Abbasi who also attended the meeting observed that since offered price of system gas and RLNG to export sector CPPs is less than the cost of alternate fuels like electricity and diesel, therefore CPPs tend to utilize the gas/RLNG less efficiently as compared to RLNG based power plants which have efficiency of 60 to 62%.

Minister of State for Petroleum stated that CPPs with single cycle or non-cogeneration technology should be encouraged to switch to power grid. He further argued that gauging efficiency of CPPs would not be a fruitful exercise, rather increasing productivity has to be benchmarked against each molecule of gas/RLNG being provided to industry.

He highlighted that if gas supply to local industry is curtailed it will lead to import substitution and is likely to impact on the import bill.

Secretary Power stated that imported RLNG is being provided at actual cost of US$15 to US$16 per mmbtu while same gas molecules are being provided to CPPs (export) at concessionary rate of US$ 6.5 per MMBTU which is not fair in terms of efficiency of CPPs versus RLNG based power plants.

He further informed the committee that CPPs and industry of export sector are being provided electricity at concessional rate of 9 cents per KWh and argued that gas is a national wealth and, given its scarcity in terms of production, requires optimal use with appropriate price signals, ie, actual cost recovery.

Wrapping up the meeting, it was agreed that given the record of protracted litigations, Government’s measures for energy efficiency audit and disconnection of gas/RLNG supplies to less efficient CPPs would be a futile exercise.

However, only effective tool available to discourage use of gas/RLNG in less efficient CPPs is to rationalize and raise gas/RLNG tariff to a level equal to or higher than alternate fuel cost.

It was agreed that since Petroleum Division is already considering revision in the consumer gas tariffs, therefore, revision in the gas tariff for CPPs on system gas may be considered keeping in view the cost of the alternate vis-à-vis equalization of inter-provincial tariff for CPPs.

It was also agreed that present RLNG tariff of US$ 6.5/mmbtu approved in September, 2018 needs appropriate revision to discourage rent seeking nature of CPPs besides limiting gas/RLNG supply.

Copyright Business Recorder, 2022

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