ISLAMABAD: A looming deadline to disconnect gas supplies to industrial power plants by January 31, 2025, has sparked a dispute between the Finance Ministry and the Petroleum Division, exposing cracks in the $7 billion International Monetary Fund (IMF) deal.
The Petroleum Division accuses the Finance Ministry of accepting the IMF’s condition without adequately assessing its impact, warning of a potential Rs427 billion loss to the government and industries. The Finance Ministry, however, asserts that the Petroleum Division was fully involved during the negotiations.
This clash highlights inadequate planning of gas sector reforms, a critical part of the IMF agreement. The reforms aim to end gas supply for industrial captive power, redirecting gas to more efficient power generation and boosting electricity grid consumption. The shift, however, is estimated to take at least two years, far beyond the IMF’s January deadline.
Prime Minister Shehbaz Sharif has chaired multiple meetings on the issue, but disagreements persist, with both sides blaming each other for poor negotiation and execution. The Petroleum Division claims it consistently sought more time to phase out gas connections but was overruled during the finalization of the agreement.
Despite earlier government steps to redefine industrial consumer categories and raise tariffs on captive power, industries may turn to alternative energy sources rather than rely on the national grid. This risks undermining the IMF’s objectives to cut idle capacity payments and normalize energy prices across sectors.
The situation underscores concerns over policy coherence and the socio-economic impact of external financial conditions.
Story by Shahbaz Rana
