Letter to PM: Govt should revisit gas price hike for CPPs: PBC

ISLAMABAD: The Pakistan Business Council (PBC) has urged the government to reconsider the recent gas price hike for Captive Power Plants (CPPs), citing concerns over its broader economic impact, particularly on Pakistan’s export competitiveness.

In a letter to Prime Minister Shehbaz Sharif, PBC Chief Executive Ehsan Malik expressed concern that the announced gas price increase, followed by additional levies outlined in a recent Ordinance, will raise the cost of gas for CPPs from Rs. 2,400/mmbtu (US$ 8.8) in November 2023 to Rs. 4,200/mmbtu (US$ 15) once the full levy is in place.

According to PBC, at US$ 15/mmbtu, the cost of gas for Pakistan’s captive units would be more than double the rate charged in Bangladesh. Furthermore, once all levies are imposed, the gas cost could surpass the global price of RLNG.

“Electricity tariffs for industry in Pakistan are already among the highest in the region. At Cents 17/kWh, the industrial tariff in Pakistan is significantly higher than India and Vietnam, where rates range from Cents 6 to 8/kWh, and Cents 9 to 10/kWh in Bangladesh,” Malik noted.

The PBC argues that over 50% of Pakistan’s export volume relies on gas-fueled captive power plants, making manufacturing the country’s least attractive sector for investment. As a result, the ambitious $60 billion export target by 2027 seems unlikely to be met.

The higher gas prices will also impact on domestic market competitiveness, further increasing reliance on imports. The gas price hike comes as the United States imposes tariffs on Chinese imports, and Pakistan risks losing out on the opportunity to benefit from order diversions.

Malik added that the move might not achieve the goal of shifting all industries to the grid. Some industries will be unable to gain access to the grid within the short time frame proposed in the Ordinance, and others will face significant costs to obtain access.

Moreover, many industries have already invested in modern captive power units due to the unreliability of grid power, and it remains unclear whether these prior investments will be considered when levies are assessed. If industries shift to the grid, SSGC and SNGPL will lose their most reliable and high-paying customers, leaving them with mostly lower-tariff domestic consumers.

This will result in a deficit that either the government or domestic consumers will need to cover, which poses a significant political challenge,“ Malik warned. He further emphasized that these issues could undermine the government’s export growth objectives.

Copyright Business Recorder, 2025