ISLAMABAD: Pakistan Textile Exporters Association (PTEA) has condemned the government’s decision to discontinue gas supply to highly efficient Captive Power Plants (CPPs) from January 1, 2025.
In a statement, Khurram Mukhtar Patron in Chief PTEA and Sohail Pasha Chairman PTEA said in a joint statement that the entire value chain has invested billions of rupees in gas-based power plants for their own use. There are 480 CPPs on the SNGPL network and 800 on the SSGC network.
PETA is of the view that CPPS require stable and consistent power through reliable sources like gas Combined Heat and Power (CHP) systems to avoid voltage drops and fluctuations in critical operations. The inability of Discos to provide stable and consistent power due to outages and fluctuations will cause enormous damage to highly automated machines throughout the textile value chain.
According to the Association, in-house power plants are designed to provide power and steam simultaneously for industrial use, making them integral to the industrial process. CPPs are much more efficient than government-owned power plants, and it is unwise to conclude that power supplied through the grid network, which has transmission and distribution (T&D) losses, will be cheaper than power produced by CHP. Even industries with their own grids lack the capacity to meet 100% of the existing power demand of industrial units.
There are also technical constraints in the transmission and distribution networks that limit the enhancement of power supply to industrial consumers.
Many large-scale manufacturing (LSM) units have power demands exceeding 10 MW per hour, requiring them to install their own grids. This is a time-consuming process that also requires billions of rupees in investment. It seems that the Government of Pakistan (GoP) made this decision hastily without proper planning or consideration.
They said, gas sector is already facing a huge circular debt of Rs 2,700 billion, and this decision will only worsen the situation for both Sui companies. CHP systems provide cross- subsidies to other sectors, amounting to more than Rs 100 billion. The cashflow of both Sui companies depends heavily on weekly billing cycles from industries. The revenue requirements of both companies will not be met, and household tariffs will increase by 100%, reaching unsustainable levels.
CHPs are the second-largest recipients of RLNG supply after the power sector. It is crucial to analyze the suspension of gas supplies to CPPs for its impact on exports and overall energy costs, as it will severely affect the $19 billion export industry and the millions of jobs it supports. This is a looming threat to the sector and to the long-term international commitments made by the export industry to supply value-added products.
The GoP has made long-term commitments for RLNG supply, and there will be surplus RLNG as a result of this decision, leading to enormous losses for the struggling sector. On the other hand, there will be mass closures in the industry, as no immediate alternative is available. The textile export value chain is already facing challenge after challenge, and this decision will only lead to the closure of industries, as there is no immediate alternative to combined power supply.
With declining inflation and policy rate cuts, the bank has developed a sizeable advances pipeline, most of which are expected to materialize in Q4′ 2024. Based on the current status and pipeline in hand, management is confident of closing the year with an Advances to Deposits Ratio of above 50%. As such, no provision has been made this quarter concerning the enhanced tax on income from Federal Government.
