Power sector: Govt to end tariff differential subsidy

Load-shedding in coming financial year threatens economic growth.

Zafar Bhutta June 04, 2011


Even though there is no respite in sight from excessive power outages, the government will eliminate tariff differential subsidy in the power sector for the 2011-12 fiscal year and revive the privatisation plan for energy companies. Pakistan Electric Power Company (Pepco) will also be dissolved in the coming fiscal year.

According to the Annual Plan 2011-12 released on Friday, the Planning Commission (PC) has warned that the peak demand for power will rise to about 21,000 MW (Megawatts) per day against additional supply of 2,110 MW in the next fiscal year.

Currently, the peak demand stands between 15,000 and 16,000 MW against a total power generation of 12,000 to 13,000 MW. The available thermal power generation capacity is not being fully utilised due to shortage of gas or furnace oil and the issue is to be addressed on a priority basis.

At least two feasibility studies in the coal sector will be conducted to generate 50-300 MW power. The restructuring and commercialisation of inefficient Public sector energy companies (PSECs) will be completed to make way for sustainable and efficient operations. The role of Ogra and Nepra will be strengthened and the option to form a Coal Regulatory Authority (CRA) will be pursued.

Furthermore, upstream regulatory framework for enhanced oil and gas recovery will be finalised. Around 15 new exploration licences will be awarded and 100 wells will be drilled, according to official targets. Crude oil production is expected to increase to 69,000 barrels per day and gas production to 4,791 MMcfd (Millions cubic feet per day).

All viable options, including expanding operations in restricted security zones, infill drilling and tapping tight gas, reviving dormant and non-performing fields and higher well head pricing will be availed to achieve sustainable gas production of 4,000 to 5,000 MMcfd and oil production of 85,000 to 90,000 barrels per day for the next five years.  The study will be conducted to review options for full cost recovery to enhance upstream production and minimisation of cross subsidies in the gas sector. The study will also address low gas prices for the fertiliser sector and find alternative ways to subsidise fertiliser prices.

Inter State Gas Systems (ISGS) will be the focal point of all Liquefied Natural Gas (LNG) import projects, shifting the responsibility from Sui Southern Gas Company Limited (SSGCL), and coordination for the pricing and tariff regime will be done by Ogra and Nepra.

Delays in LNG import projects have increased gas shortages and hurt industrial production. The stalled Mashal LNG project will be revived to import 500 MMcfd of LNG.

A cap will be announced on future furnace oil consumption in the power sector (11 million tons per annum) as proposed in the Pakistan Economic Growth Framework. Support will be extended to Pakistan State Oil (PSO) for development of expertise in international oil trading, vessel chartering and oil hedging to avail market opportunities and minimise import cost of products.

The 7.5 % deemed duty on High Speed Diesel (HSD) will be shifted to transparent taxation in retail prices. As a policy matter, this refinery support will be discontinued after three years to encourage refineries to upgrade products.

Published in The Express Tribune, June 4th, 2011.


riazahmed | 10 years ago | Reply sui southern gas ltd co is very best service in Billing customers.
Iftikhar-ur-Rehman | 10 years ago | Reply Power sector: Govt to end tariff differential subsidy and to squeeze poor public for more, great work Mr. PM and President.THAT IS ALL YOU CAN DO
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