Amid the worst power outages and high electricity rates, the present government has a hectic task ahead to conduct energy audits of the textile barons and other export-oriented industries which received subsidies on gas worth billions of rupees.
These industries had enjoyed billions of rupees in subsidy on gas but later, they obtained stay orders from courts to block energy efficiency audits of captive power plants.
This means that they were receiving subsidised gas and they were also wasting the resource at the same time by producing less electricity owing to poor energy efficiency, energy ministry officials said. They added that the previous government decided to conduct an energy efficiency audit of these power plants but the firms obtained stay orders from the courts.
During the end of its tenure, the PTI government started a probe to gauge the impact of the subsidy on exports.
The Ministry of Finance and other stakeholders were of the view that there was no increase in export quantity and the rise in export value was due to devaluation of the rupee against the US dollar.
While probing gas supply to different sectors, National Accountability Bureau (NAB) observed that it was a criminal offence to provide cheaper gas to captive power plants while shutting down the most efficient power plants.
The textile industry, with captive power plants, had also been receiving round the clock subsidised electricity and gas for self-power generation.
The Petroleum Division had also conducted a study that revealed that local sales of those textile units increased that were not exporting products.
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The PTI government linked the release of pending Rs40 billion subsidies to the export-oriented sector on the condition of conducting an energy efficiency audit.
Now, the Economic Coordination Committee (ECC) or the Cabinet Committee on Energy (CCoE) will have to take a decision to move ahead in the plan for conducting the audit.
Sources told The Express Tribune that the National Energy Efficiency and Conservation Authority (Neeca) was seeking permission from the government to shortlist companies to conduct energy efficiency audits of the pre-qualified validating firms for conducting audit of self-declared co-generation units.
The CCoE in its meeting held on June 4, 2020, considered a summary on Policy Guidelines for Energy Efficiency Audit for Captive Power Plants’ and approved the minimum efficiency benchmarks set for captive power units whether in a single cycle or combined cycle using natural gas as a primary fuel.
It approved 45% minimum net efficiency for units of up to 50MW and 50% minimum net efficiency for units above 50MW.
It also approved benchmarks for captive units, in simple and combined cycles, where steam is also used in the process of industrial undertaking, with a minimum net combined electrical and thermal efficiency of 60%.
It was also decided that the captive power units not meeting the approved criteria will be given time to modernise themselves and in case of failure to comply, the gas tariff for such units will be revised to match the notified re-gasified liquefied natural gas (RLNG) tariff.
Pursuant to this decision of the CCoE, Neeca served notices to the captive power units of its intent to conduct efficiency audits.
The units preferred to seek stay orders from the respective high courts restraining Neeca to proceed further.
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As per the latest information available, 595 units (284 on Sui Southern Gas Company and 311 on Sui Northern Gas Pipelines Limited) declared themselves as co-generation units.
However, only 481 units submitted affidavits to Neeca and out of these, 117 units went into litigation and only 47 units have conveyed unconditional willingness for audits to Neeca.
The CCoE. in its subsequent decision on January 21, 2021, considered the summary and approved that gas/ RLNG supply to the captive power units of both non-export and export industry with sufficient electricity loads will be discontinued with effect from February 1, 2021.
Only exception was for the units who did not have electricity connection and the cogeneration units who were to undergo energy efficiency audit of Neeca within three months of their declaration by February 01, 2021.
Neeca initiated hiring of the validation firms. After due diligence, it had shortlisted three firms and estimated the cost of 481 units at Rs632.37 million.
Now, the current government which is considered to be pro-industry will have to take a decision to move ahead on a plan of conducting energy efficiency audits or not.
Published in The Express Tribune, April 22nd, 2022.
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