The Commerce Ministry has approached the Prime Minister, urging a reversal of the federal government’s recent directive to cut gas supplies to Captive Power Plants (CPPs), a decision that aligns with commitments made to the International Monetary Fund (IMF). According to sources, this measure, set to be enforced from January 1, 2025, could severely impact Pakistan’s export sector by increasing operational uncertainties, potentially eroding international buyer confidence.
Over the years, Pakistan’s industries were encouraged to set up power generation systems using natural gas and other fuels to ensure competitiveness in global markets. Many sectors adapted by installing CPPs to manage energy demands effectively, maintaining a competitive edge. However, recent years have seen significant gas supply reductions in the industry, driven by domestic supply constraints and growing demand from household and commercial users.
Since 2018, the government has provided export-oriented sectors such as textiles, leather, and sports goods with a reduced RLNG/gas tariff to enhance their competitiveness. However, since FY 2022-23, in response to foreign exchange pressures, gas tariffs for CPPs have sharply increased, further escalating operational costs for industries.
In a recent ECC meeting, the Petroleum Division proposed further gas price hikes and issued notices for the disconnection of CPPs starting in 2025, per IMF agreements. The Commerce Ministry has warned of adverse consequences for exports, including potential production halts due to unreliable national grid electricity. It has proposed a priority gas allocation for CPPs that meet efficiency standards, removal of cross-subsidies on export sectors, and stable, predictable tariffs.
The Commerce Ministry’s appeal emphasizes that the shift could harm Pakistan’s export sector, risking job losses and reduced revenue. A letter dated October 18, 2024, details recommendations for prioritized gas supply, reliability audits, and uninterrupted grid electricity for industries, seeking to maintain stability amid rising challenges.
