ISLAMABAD: The denial by the government to supply gas and electricity at regionally competitive tariff to the export industry has not only jeopardized the expansion in industrial base and investment that have so far taken place in the textile sector but also the $2 billion investment that is in the pipeline.
And under the latest scenario, the expansion in industrial base has virtually come to rest, as all the new equipment and feasibility was based on sustained gas/RLNG supply at regionally competitive rates to provide stable and reliable power.
This all has directly been conveyed to the prime minister of Pakistan by the APTMA chairman in his letter written on March 11, 2021.
The letter, while berating the decision taken by CCOE on moratorium on gas/RLNG supply to Captive Power plants (CPPs) of the export oriented sector and highlighting the catastrophic impact on expansion of industrial base, informed the top man of the Government of Pakistan that industrialization that earlier picked up the momentum has now been halted.
"The expansion and investments in the textile sector are a direct consequence of your government's policy of Regionally Competitive Tariffs. Since under the CCOE decision, the gas supply to CPPs is being disconnected from March 15, 2021, so the momentum gained by this effective and progressive policy will be lost if the decision on captive power is not reversed.
"The previous decision of CCOE to reduce the price of power to 7.5 cents per unit to encourage mills to shift to the grid was not implemented, but the decision to impose a gas supply moratorium for Captive Power of Export Oriented Units (EOUs) will result in an increase of over 10pc in the final cost of export orders eroding competitiveness."
The APTMA chairman built his arguments saying that a substantial number of textile mills have both gas and electricity connections while their power requirements are over Rs5 MW. The additional loads are met through gas-based generation as the grid power alone is insufficient.
Recognizing this problem, NEPRA recently allowed enhancement of load limits on B3 industrial connections from 5 MW to 7.5 MWs without the installation of a new grid. DISCOs have refused to accept this NEPRA decision. Furthermore, many of our members have applications for enhancement of load pending with the DISCOs. Most have even paid for the enhanced loads. DISCOs are not willing to acknowledge inability to supply or give in writing the pendency of the applications while SNGPL and SSGCL require such certifications in writing from the DISCOs to avoid disconnection on the 15th March 2021.
APTMA contends that the policy of suspending gas/RLNG supply to CPPs is discriminatory as the integrated textile units (very few in numbers) will continue to get gas/RLNG while the entire SME sector will not. It is pertinent to note that the SME sector employs 70pc of the industrial labour and this action which will result in 40pc enhanced cost of conversion and SMEs will be forced out of business.
The letter also says: “The assumption of 3,000 MW additional load on the grid is not correct as the total gas consumption by the CPPs is 450mmcfd out of which 350mmcfd is consumed in cogeneration units while only 100mmcfd is used by CPPs for power generation only. The estimated quantity of gas that will be disconnected as a result of this policy is approximately 100mmcfd, as most of the industrial units are already operating on a cogeneration basis. The disconnection of gas will temporarily shift a load of 350MWs to the grid as all the units will ultimately convert to cogeneration. The very small additional temporary load gain on the grid is not significant enough to justify risking the sector's growth momentum.
The letter also drew the attention of the PM to the fact that the gas moratorium policy was formulated and approved without stakeholder consultation and definition of cogeneration or efficiencies. “This has caused a lot of confusion and uncertainty in the industry.”
It also says that grid electricity is not of the quality that can damage sensitive electronic equipment. The recent example of several units switching from gas/RLNG to grid to avail the incentive of lower marginal rates has been reversed by nearly all units as the loss of production due to the variation in the electricity has been a far heavier cost than the lower electricity rates.