Gas crisis aggravates: Suspension of RLNG supply to export units on the cards

ISLAMABAD: Fearing a massive surge in gas availability crisis in the country, the government has decided to even close down gas supply to export industry once a week if the emergency-like situation emerges in the month of January.

The Petroleum Division is going to get it approved from the Economic Coordination Committee (ECC), which will meet on Wednesday (today), according to the summary, prepared by the Petroleum Division.

However, the move, on the part of the Petroleum Division, has not only irritated the export industry but also Adviser on Commerce and Investment Abdul Razak Dawood, as the industry and Dawood are of a firm belief that the move would hamper meeting target of the export orders. So in the ECC meeting, a stormy session is being anticipated over the summary of the Petroleum Division, seeking one-day closure of gas to export industry in a week, apart from the proposals to ensure the closure of CNG sector for 4-5 days in a week and halting the gas supply to captive power plants for general industry and fertilizer sector. More importantly, RLNG supply will also be curtailed to power plants.

Sources said the Petroleum Division had recommended to the Cabinet Committee on Energy (CCOE) on Nov 26, 2020 to stop gas supply to the export sector captive plants where the industry had an electricity connection and could be given electricity instead.

However, the sources said that the CCOE had rejected the recommendation of the Petroleum Division and directed that RLNG/gas to export oriented units captive be continued. They said that the textile industry was getting electricity generation at a cost of Rs10 per unit based on RLNG as fuel available at the cost of $6.5 per MMBTU.

The export industry is also being provided electricity from the national grid at Rs14.5 per unit (9 cents per unit). The officials in the commerce ministry dealing with the textile sector said that this switch, if implemented, would increase the cost of energy to the bulk of the industry by nearly 50% and render the export uncompetitive.

They argued that energy constitutes more than 35% of industry conversion costs (i.e. excluding basic raw materials) while in India or Bangladesh, these costs are less than 20%.

Shahid Sattar, Executive Director of All Pakistan Textile Mills Association (Aptma), when contacted, berated the Petroleum Division move saying that at a time when the textile industry was on way to catering to the export orders, the move would hit the exports of the country hard.

However, he said the industry would have no problem in switching to power if the rate was dropped to 6 cents i.e. Rs10 per unit all-inclusive for the entire consumption and not just on incremental load.

Aptma urged the ECC and the government to reject the recommendation of Petroleum Division seeking curtailment of RLNG/gas supply to export oriented units captive for even one day a week and instead give the industry the reduced rate of electricity and industry would voluntarily curtail RLNG/gas consumption. The textile exports registered an increase of 9% in the month of November 2020, and were on an upward trajectory with many new units being set up or expanded. However, disruption of any nature to export oriented units at this stage would damage exports.