Govt to align CPP gas tariff with RLNG rates following IMF advice

Starting July 1, 2024, the government is expected to align the gas tariff for captive power plants (CPPs) with the price of Re-gasified Liquefied Natural Gas (RLNG), following directives from the International Monetary Fund (IMF).

Energy Ministry officials indicate that the current rate of Rs2,750 per MMBTU for CPPs will be revised to match RLNG prices due to efficiency concerns and grid connectivity issues.

While the government sought to delay the transition of CPPs to the national grid until December 2024, the IMF insists on completing the process by June 2024, necessitating the tariff adjustment.

This move is aimed at standardizing energy costs and enhancing the efficiency of power production, especially for CPPs primarily within the Sui Southern network, which have an efficiency rate of 30-35%.

The impending tariff adjustment also includes considerations for the power sector, with the current gas price for power plants at Rs1050 per MMBTU.

Sui Southern and Sui Northern gas companies have proposed significant tariff increases to cover revenue shortfalls, with anticipated adjustments of 10-15%, translating to an increased revenue impact of Rs100-150 billion.

Furthermore, the government plans to avoid additional tariff hikes for domestic consumers, who have already faced substantial increases.

The focus remains on managing the financial health of the gas sector, addressing the circular debt, and rationalizing energy prices to ensure sustainable supply and consumption patterns.