Costly RLNG to replace cheap blended gas for Punjab textile sector from January

LAHORE: The textile industry in Punjab will have to pay more for gas from January as the state-owned gas utility switches to supplying costly imported liquefied natural gas (RLNG) for running captive power plants.

The Sui Northern Gas Pipelines Ltd (SNGPL) has been providing a blend of 50 percent locally produced gas and 50 percent RLNG to new and old industrial and captive consumers of export sectors during November and December, following a decision by the federal government’s Economic Coordination Committee (ECC) and cabinet in October.

However, from January, the gas utility will supply 100 percent RLNG for three months, without any subsidy, as per an earlier decision by the government. This will increase the gas tariff for the Punjab textile industry after consuming relatively cheap blended gas until December 2023.

As per an earlier decision taken by the government, the gas utility was supposed to supply a blend of 50:50 of system gas and RLNG during nine months (March to November) and 100 percent RLNG for the remaining three months of the year without any subsidy. However, with new arrangements, the industry would get an additional month of relatively cheaper blended gas during the month of December 2023.

As per earlier arrangements precisely worked out between the Director General Gas and Director General Textile at the government, who held a discussion for having clarity about the federal cabinet and ECC decisions in this connection, SNGPL was to provide a blend of 50 percent indigenous gas and 50 percent RLNG for nine months (March to November), and 100 percent RLNG for three months (December to February). However, the industry was given an additional month of relatively cheaper gas by the year end.

Industrial units fed by Sui Southern Gas Company (SSGC) are getting a blend of 75 percent indigenous gas and 25 percent RLNG all year (January to December). Based on these ratios, the weighted price of gas at the rate of $10.8478/MMBtu has been calculated for SNGPL consumers for November and December 2023. On the other hand, the industry in the SSGC area is being provided a blend of gas at $9.7396/MMBtu.

Explaining the costing of blended gas, it is stated that the gas tariff was calculated assuming an indigenous gas price of Rs. 2400/MMBtu and an RLNG price of $13.3332/MMBtu for SNGPL, an RLNG price of $13.8716/MMBtu for SSGC, and a dollar to rupee exchange rate of Rs287 as on November 10, 2023.

It is made clear that these ratios are subject to change depending on the availability or non-availability of indigenous gas. As these ratios are subject to change, there is no long-term predictability or consistency as far as pricing is concerned.

The same blended tariffs shall be applicable to all existing and new customers, but do not include new connections after June 2022, as they have not been registered as zero-rated by FBR and no new registration process is mandated, as per the decision taken by the federal government.

It may be noted that the rationalisation of gas tariffs for the textile industry, which accounts for about 60 percent of the country's exports, is bound to increase with the gradual enhancement in the share of imported RLNG in the blended gas for all federating units of the country. Punjab industry is presently given mostly imported gas, while Sindh and Khyber Pakhtunkhwa industry’s reliance on RLNG has been relatively on the lower side.