IT is a common practice: the government makes commitments with global lenders for their money and then tries to wriggle out of them when faced with pressure from powerful lobbies that might be affected. Previously, it would find a way around the agreed reforms. But no longer. On Tuesday, it had to notify a grid levy of Rs791/mmBtu on all supplies of domestic gas and imported LNG to captive power plants as required under the ongoing IMF programme. The policymakers had been delaying the levy under pressure from the wealthy textile lobby but were forced to notify it after the visiting IMF mission, currently scrutinising progress on the present loan agreement, took a “tough stance”.

The new levy raises the gas prices for captive power by 23pc to Rs4,291 and comes on top of the recent increase of Rs500 to meet power sector restructuring benchmarks under the IMF loan. The idea behind making gas supplies expensive for captive power is to discourage cheaper self-generation by the industry, and force it to switch to grid power for its electricity needs to boost consumption of excess grid electricity for long-term power sector viability. The shift will deprive the industries of a cheaper energy source, making exports more expensive. However, it will potentially lead to an average reduction of Rs2 per unit for every consumer linked with the grid, a goal for which Aptma and FPCCI had launched a campaign against the IPPs. Besides, it must force textile exporters to invest in plant efficiencies, and move towards value-added products for higher export earnings. Simultaneously, distribution companies will have to invest in their networks to ensure reliable supplies to industrial users apart from expanding to areas where factories still cannot access the grid. That said, the government needs to urgently come up with a plan to reduce the burden of Rs1.5 per unit on grid users due to its bad rooftop green metering policy for affluent segments of society.

Published in Dawn, March 13th, 2025