ISLAMABAD: The government is navigating a critical challenge under the $7 billion IMF program, which mandates disconnecting Captive Power Plants (CPPs) from the gas supply by January 2025. This structural benchmark, intended to transition industries to grid electricity, has sparked concern among policymakers.
In a high-level meeting chaired by Finance Minister Senator Muhammad Aurangzeb, four federal ministers, including those for commerce, petroleum, and power, discussed strategies to address the issue. The meeting concluded with a proposal to seek a six-month extension from the IMF for implementing the benchmark while pursuing its removal through negotiations.
The Commerce Ministry highlighted potential risks to exports, warning that unstable electricity supply from the grid could erode global buyers’ confidence and harm foreign exchange earnings. Meanwhile, the Petroleum Division cautioned that disconnecting CPPs could jeopardize cross-subsidies essential for domestic gas tariffs, leading to higher energy costs for consumers.
The Power Division emphasized the need to adhere to the IMF agreement, which seeks to redirect gas to national power plants for efficiency gains. However, it acknowledged the logistical challenges, including a Rs25 billion requirement for grid station installations to connect industries relying on CPPs.
As the government prepares to present its case, officials aim to balance IMF conditions with the economic implications for exports, energy pricing, and domestic gas supply stability.
Story by Khalid Mustafa
