21 August, 2014 / Shawwal 24, 1435

Gas tariff for CPPs raised

Published Aug 24, 2013 11:34am
- File Photo
- File Photo

ISLAMABAD: The government on Friday increased gas rates for Captive Power Plants (CPPs) by more than 17 per cent with immediate effect but remained undecided about the timing of tariff increases for other consumer categories owing to possible legal hitches.

After a series of consultations, the Ministry of Petroleum and Natural Resources issued policy advice to the Oil and Gas Regulatory Authority (Ogra) to jack up gas price for the CPPs by Rs85 per mmBtu (million British Thermal Units).

As a result, the Ogra notified fresh rate of gas for sales to CPPs at Rs573 per unit from existing rate of Rs488 per unit (mmBTU). The decision is part of the government strategy to increase the cost of gas for inefficient consumption so that maximum gas could be available for larger power plants with better efficiency.

An official said a total of about 323 captive power plants in the industrial sector particularly belonging to textile units are currently consuming more about 350 MMCFD of gas for their internal use even though these quantities of gas could produce more than 2000mw of electricity from larger units and scale down overall power generation cost by almost 30 per cent.

He said the gas tariff for captive power plants and fertiliser units would be further jacked up through Gas Infrastructure Development Cess (GIDC) suspended for the time being by the Islamabad High Court.

Officials said the stakeholders headed by Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi and comprising the two gas utilities and Ogra could not agree to the timing of increase in gas tariff approved by Ogra at Rs22 per unit for all consumers.

This was because of a simultaneous tariff rationalisation plan for gas sales through which the government wanted to bring gas rates in conformity with market based prices of gas imports like liquefied natural gas and Iranian gas, reduce cross subsidies and divert scarce resource to more productive sectors.

The challenge emanated from the fact that existing laws allow the government to make adjustments in gas prices only twice a year. At the same time, the government has challenged in the supreme court of Pakistan a decision of the Islamabad High Court that suspended recovery of GIDC.

There was a strong opinion that if the government increased Rs22 per unit increase for all consumers as required under the determination of the Ogra, it may legally become difficult to increase gas rates for another time in the near future at least for six months in case the apex court revived the GIDC by overturning the IHC decision.

The government intended to rationalise gas tariff for fertiliser, CPPs, CNG and other industrial consumers through higher GIDC through its broader tariff rationalisation plan.

At the same time, the apex court had taken up the GIDC issue on August 22 but adjourned the case for two weeks after attorney general of Pakistan Munir A. Malik sought time to study the case. There was also an opinion that the tariff adjustment should be put on hold for two weeks to see the outcome of case before the apex court.

Therefore, the minister for petroleum and natural resources decided to put on hold the tariff increase for all consumers for the time being even though the gas utilities insisted on increasing gas tariff for domestic consumers to enable them improve cash flows.

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