$18bn textile exports in jeopardy, APTMA tells PM

ISLAMABAD: Following the imposition of off-the-grid levy on the captive power plants (CPPs) causing a hike of Rs791 per MMBTU in their gas tariff to Rs4291 ($15.38) per MMBTU, the textile export of $18 billion are at risk.

The All Pakistan Textile Mills Association (APTMA) conveyed this in a letter written to Prime Minister Shehbaz Sharif on Friday asking for immediate intervention to save the industry.

The letter provided the way forward to the premier seeking gas supply at the RLNG ring-fenced price with no cross-subsidies or levies.

The industry also sought permission to purchase 35 percent gas from the new gas discoveries under the newly amended E&P policy at the auctioned price under the third-party access rules. The industry also suggested the prime minister to allow it to directly import its own RLNG.

The textile industry is no longer in a position to compete with the regional economies such as Bangladesh, India, Vietnam and China, as they are providing gas to their export industry at $6-9 per MMBTU and electricity at 5-9 cents per unit.

Over the past two years, the gas price for captive power plants has increased from Rs1100 per MMBtu to Rs3500 per MMBtu. Now, an additional levy of Rs791 per MMBtu has been imposed, taking it to Rs4,291/MMBtu ($15.38). In the letter, the APTMA questioned the levy’s calculation of Rs971 per MMBTU on CPPs saying it is totally incorrect. It argued that even according to the ordinance, the levy comes to negative Rs556.31 per MMBtu.

“If the textile sector is to survive and thrive, its energy requirements must be met. The grid is not well-positioned to serve the full industrial energy demand. Captive power generation, particularly cogeneration, is essential.”

The ordinance explicitly states, “The rate of the levy shall be increased by five percent immediately and further increased to 10 percent by July 2025, 15 percent by February 2026, and 20 percent by August 2026.” According to Clause 4, the rate of the levy is defined as differential between the power tariff for the B3 industrial category and the cost of captive power generation

The letter also drew the attention of the premier to the fact that the 2021 Cabinet Committee on Energy decision had been misrepresented to justify across the board elimination of captive.

It allows for combined heat and power plants that are extremely efficient, internationally standard, and essential for meeting climate taxes and targets, to continue.

At Rs3,500 per MMBtu, the cost of captive generation is between 14-18 cents/kWh, while grid tariffs are 12 cents/kWh. The letter also says the intention of the CCOE decision was to phase out inefficient single-cycle captive generation while allowing efficient cogeneration units to continue receiving gas supply.

However, the decision is now being misapplied to justify a blanket approach that disregards the critical efficiency and energy security benefits of cogeneration.

In response to this decision, the industries invested Rs128 billion in upgrading to high-efficiency cogeneration facilities.

Pointing out the infrastructure challenges in transitioning to grid electricity, the APTMA says there is not sufficient electricity and supporting infrastructure available on the grid.

Secretary (Power Division) has stated before the Senate Standing Committee on Energy that DISCOs are not in a position to meet the electricity demand currently served by captive generation and will need at least 2-3 years. The APTMA also mentions that Karachi Electric is issuing unreasonable/outrageous demand notes; in certain cases industrialists who applied for load enhancement were furnished a bill of Rs9.5 billion with a lead time of 3 years post-fulfillment.

“There is not enough physical space needed for new grid/power supply installation, especially in urban manufacturing hubs like Karachi.”