Power Crisis: Hike mulled in gas prices for CNG

Gas prices for power plants will be maintained at their current level in order to keep the power tariff low.

ISLAMABAD:

As power outages cut deeper into the country’s economic fibre, authorities are considering raising gas prices for CNG consumers, fertiliser manufacturers and captive power plants in a bid to ease the energy crisis.

According to sources privy to developments, the gas tariff rationalisation plan will be tabled before the new Pakistan Muslim League-Nawaz government for a policy decision. The plan aims to bring gas prices for CNG consumers, fertiliser manufacturers and captive power plants at par with oil prices in order to discourage its use and make it available for power generation. Gas prices for power plants, meanwhile, will be maintained at their current level in order to keep the power tariff low.

“This will be a part of the policy to wipe out CNG stations so that gas could be diverted to power plants which are operating on furnace oil and high speed diesel (HSD), making power generation expensive,” a senior government official told The Express Tribune.

“The previous Pakistan Peoples Party-led government also tried unsuccessfully to wipe out CNG stations… now the plan will be tabled before the PML-N government,” he added. The cost of generating power using furnace oil and HSD has forced the government to subsidise power rates, he maintained.

According to the official, fertiliser manufacturers were receiving a Rs11 billion subsidy on the feed stock of gas, but its impact was not being passed onto consumers.

While fertiliser manufacturers have given their consent to the gas tariff rationalisation plan – which will bring the cost of local fertiliser at par with imported fertiliser – they are planning to pass the impact of the hike in gas prices onto farmers, he added. As such, the PML-N government would be advised to provide directly subsidise fertiliser for farmers, rather than through the manufacturers who have been exploiting the incentive, the official maintained.

Captive power plants

Despite their inefficiency, captive power plants are receiving 450 million mmcfd gas a day at the cost of efficient power plants, placing a huge burden on the power sector and forcing the government to subsidise power rates.

The Planning Commission has already suggested cutting off the gas supply to captive power plants and providing the saved resource to other power plants in order to tackle the worsening power crisis. The proposal is in line with the views of the National Accountability Bureau, which considers supplying gas to inefficient plants a criminal act and is investigating the captive power scam.

During the deliberations held at NAB headquarters in Islamabad in April, the Planning Commission and the National Electric Power Regulatory Authority pointed out that gas was being supplied to less efficient power plants at the cost of efficient ones, which were being forced to run on expensive alternative fuels like diesel. Had gas been diverted to the more efficient plants, it would have added a considerable amount of power to the national grid at a far lesser cost, they stressed.

Published in The Express Tribune, June 7^th, 2013.