ISLAMABAD: A key cabinet minister has raised concerns over the potential misuse of cheaper industrial gas for power generation, cautioning that captive power plant (CPP) owners might exploit loopholes or seek legal stay orders to avoid the recent price hike.
Minister of State for Finance, Ali Pervaiz Malik, has urged the government to introduce a transparent mechanism to prevent industries from using Rs2,150/MMBtu industrial gas instead of the newly raised Rs3,500/MMBtu gas meant for CPPs. He warned that the current system allows for such manipulation.
This development follows revelations that nearly 2,100 industrialists in Sindh and Balochistan have already secured court stay orders, withholding Rs172.5 billion in Gas Infrastructure Development Cess (GIDC) payments despite having collected the amount from consumers, including farmers.
In a letter to Finance Minister Muhammad Aurangzeb, who also chairs the Economic Coordination Committee (ECC), and the Cabinet Division Secretary, Malik stressed the need for a fair, enforceable process. He insisted that no open-cycle CPP should be allowed to operate using gas allocated for industrial processes.
The ECC recently approved a Rs500/MMBtu gas tariff hike for CPPs while instructing the Petroleum Division to impose a grid transition levy to encourage the shift to grid electricity. This aligns with IMF conditions aimed at either disconnecting CPPs from gas or making gas-based power generation more expensive than the grid. The government has opted for the latter approach, ensuring gas remains at least 5% costlier than grid electricity.
However, industrialists in Sindh are expected to challenge the price hike in court, as they have previously done against the blended gas pricing mechanism. Malik emphasized the need for the Attorney General’s Office to expedite pending litigation before implementing the revised tariffs, warning that Punjab-based industries could face unfair disadvantages.
Meanwhile, Sui Southern Gas Company (SSGC) spokesperson Salman Siddiqui confirmed that some CPPs have contested the blended pricing formula, but clarified that no legal challenges exist against the February and July 2024 price notifications. He noted that 828 CPPs operate on SSGC’s network, with 148 already shut down due to payment defaults.
Additionally, a long-pending GIDC case remains unresolved in the Sindh High Court, with Rs184.7 billion outstanding on SSGC’s network, including Rs172.6 billion stuck due to stay orders. SSGC continues to recover legal costs from consumers through revenue adjustments, subject to approval by OGRA.
As legal battles loom, the government faces mounting pressure to close loopholes, ensure fair energy pricing, and enforce compliance across all industrial sectors.
