Suspension of gas supply to push up production cost

Exporters say they are now compelled to consume expensive RLNG

FAISALABAD: Textile exporters have resented what they say is an unfair suspension of natural gas supply to the export-focused industry in Punjab, terming the move counterproductive.

“Provision of high-priced re-gasified liquefied natural gas (in place of domestically produced natural gas) will further add to the production cost and hamper export growth,” said Pakistan Textile Exporters Association (PTEA) Chairman Shaiq Jawed in a statement on Tuesday.

Calling the curtailment of 28% gas supply a unilateral decision, he decried that the Punjab textile industry was already facing a serious blow due to high cost of doing business and comparative disadvantage in the region.



With the suspension in natural gas supply, the exporters are compelled to consume the high-priced RLNG at Rs1,100 per million British thermal units. They were earlier using a blend of 28% natural gas and 72% RLNG, but from December 7, Sui Northern Gas Pipelines stopped the supply domestic natural gas and shifted the industries entirely on to RLNG.

In order to arrest the production cost and address disparity in gas tariff in the country, the government had continued to provide natural gas under a quota system in previous winters.

At a time when industrial production and exports were on the rise, Jawed feared, the absence of cheaper gas would reverse the pace of growth.

The Punjab industry predominantly relies on natural gas for its captive power plants as well as the manufacturing process, but the switch to RLNG will negatively impact the production cost.

“The export sector being the lifeline of national economy is very sensitive and any disruption or bottleneck in the way of facilitation not only hurts exports, but also have a devastating impact on the industry, causing productivity loss, job losses and industrial unrest,” Jawed cautioned.



Separately, PTEA Vice Chairman Ammar Saeed suggested that the government should frame a comprehensive strategy to counter the high energy tariffs in an effort to gain competitive edge in the international market and to accelerate the pace of industrial production and exports.

“Gas is a major element in textile processing, but high prices of RLNG have increased the cost of production, rendering the Punjab textile industry uncompetitive even within the country,” he said.

For Punjab industries, the RLNG price is around Rs1,100 per mmbtu whereas domestically produced natural gas is supplied at Rs600 per mmbtu excluding the GIDC.

Published in The Express Tribune, December 13^th, 2017.

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