Industry rejects new gas levy, wants LNG sector deregulated

ISLAMABAD: In a new development, the export and non-export industries with captive power plants have asked the government to issue gas disconnection notices, as they can no longer bear the imposition of a levy on the new gas price of Rs3,500 per MMBtu.

Industrialists from both the southern and northern parts of the country have said that they will not operate their industrial units if the government imposes a levy on the new gas tariff for CPPs. Instead, they have asked the government to deregulate the LNG sector, allowing them to import LNG for captive power plants.

They also called for arranging gas supplies for CPPs under the amended E&P Policy 2012, which permits the private sector to purchase 35% of gas from exploration and production companies.

This request was conveyed to Petroleum Minister Dr. Musadik Malik and senior officials during a meeting held on Tuesday, which was attended by business tycoons from across the country, both in person and via Zoom and Skype.

Talking to The News, former APTMA chairman and eminent businessman Asif Inam confirmed that a meeting was held with the minister and top officials of the Petroleum Division, where the industry rejected the levy on the gas tariff for CPPs. He also emphasised the need for the government to deregulate the LNG sector, allowing them to import LNG and use it for captive power plants. Asif Inam said the government is creating obstacles to obtaining gas from E&P companies through third parties, even under the amended E&P Policy 2012. He also said that while the government is not ensuring a reliable supply of grid electricity without interruptions or fluctuations, it insists on imposing the levy on the newly increased gas tariff of Rs3,500 per MMBtu for CPPs. He said that the government had already raised the natural gas tariff to match the price of RLNG. “If the government wants to impose a levy on the tariff, it would be better to disconnect CPPs from the gas supply,” he said.

“If the levy is imposed, the tariff would increase by Rs800 to Rs2,500 per MMBtu, depending on the efficiency of the captive power plants. This will not be acceptable to the industry,” a top official, quoting the industrialists, told The News.

“At present, electricity from the grid is priced at 13–16 cents/kWh, significantly higher than the rates in competing economies like China, India, Vietnam, Bangladesh, and Uzbekistan, where electricity is available at 5–9 cents/kWh,” the industrialists said, adding, “The industry is left with no option but to arrange its gas supplies under a deregulated regime and the BtB RLNG business model.”