RLNG price at $9/mmbtu for Punjab export sector likely

ISLAMABAD: The government is likely to increase RLNG tariff for export sector in Punjab by $2.5 to $9 per mmbtu from July 1, 2022. Raise in gas tariff for the export industry in Sindh up to $7 is also likely.

Decrease in electricity tariff to 8 cents per unit from 9 cents for export sector has been proposed to incentivise the maximum usage of electricity for production of textile products, senior officials of the Energy Ministry told The News.

As the government is left with no option but to increase the RLNG price for captive power plants of textile sector to $9 per mmbtu from $6.5, keeping in view the massive surge in LNG price in the international market, the export industry has shown its willingness to agree on $9 per mmbtu. However, the government has increased the gas price for the export sector in Sindh up to $7 per mmbtu.

Well-placed sources said the export sector in Sindh is currently being provided gas at $4 per mmbtu (Rs800 per mmbtu), and it is not possible for the government to increase that tariff by up to Rs1,800. So, it has been decided that gas tariff for export be increased up to Rs1,300-1,400 per mmbtu.

Exporters of Sindh said they do not need RLNG as their province has enough gas to cater to their needs. But, the federal government, they said, has persuaded them to pay $7.5 per mmbtu as the local gas production is fast depleting by 9 percent each year.

Sources in the Energy Ministry said for the next budgetary year to be started from July 1, 2022, the government has earmarked subsidy in the RLNG supply to the export sector at Rs40 billion and for diversion of imported gas to domestic sector at Rs25 billion. Rs36 billion have already been doled out to public sector stakeholder entities against diversion of RLNG to domestic sector for the outgoing fiscal 2020-21.

The PTI government earlier revised the RLNG price from $6.5 per mmbtu to $9 for captive power plants of exports industry in Punjab last winter season because of paucity of gas and high prices of imported gas.

Meanwhile, officials and industrial sources said the world is most likely to face a recession next year because of increasing inflation on account of a surge in POL, coal and LNG prices. And in the presence of a recession, the demand from Europe and US for imports from countries, including Pakistan, would reduce and competition among the regional countries for exports to Europe and the US would increase. They said the exports of regional countries whose energy tariff would be at the lower side would increase in the international market.

Though exports of textile products have jumped up by 28 percent in the first 11 months to $17.67 billion from $13.76 billion in the same period of the last fiscal 2020-21, these would stay below $20 billion target by the end of June 2022.

“In the wake of energy supply constraints, textile production decreased by $300-400 million every month from November 2021 owing to which textile exports are most likely not to touch the target of $20 billion. They will hover around $19.6 billion”, sources said.

Textile mills in Punjab, from November 2021, have been experiencing unanticipated disruptions in the supply of electricity, inordinate breakdowns and fluctuating voltage, resulting in significant losses to the industry.