ISLAMABAD: The government has withdrawn Rs80 billion subsidy on gas to five export-oriented sectors and Sui Northern Gas Pipelines Limited (SNGPL) has informed its noble customers about an end to the supply of subsidized gas from May 1, 2023.
The government was previously paying the subsidy to the textile, sports, surgical, leather, and jute sectors. These sectors were offered concessionary tariffs for the supply of gas/re-gasified liquefied natural gas (RLNG).
SNGPL, in a letter dated 29th April, 2023 to a customer, informed that the subsidy allocated by the government for supply of gas/Re-gasified Liquefied Natural Gas (RLNG) at subsidized rate to five export-oriented sectors for financial year (FY) 2022-23 has been fully exhausted.
Therefore, the SNGPL is constrained to withdraw concessionary tariff to five export-oriented sectors with effect from 01-05-2023, said SNGPL letter carrying subject “Exhaustion of Allocated Budgeted Subsidy on RLNG Price to Export Oriented Sectors” dated 29-04-2023.
“Please note that Gas/RLNG supply to your industrial units shall remain available at OGRA notified tariff w.e.f 01-05-2023,” reads SNGPL letter.
According to sources, the supply of RLNG to these sectors will end at $9, and they will have to pay an additional $4 per MMBTU on supply of RLNG. The federal government ended the series of concessions on the continuous demand of the IMF and other sectors. This decision was also endorsed by the National Electric Power Regulatory Authority (NEPRA) in March 2023. The NEPRA approved the federal government’s decision to withdraw concessional tariffs of five export-oriented sectors and agriculture tube-wells from March 1, 2023.
Earlier in March 2023, the National Electric Power Regulatory Authority (NEPRA) had endorsed the federal government’s decision to withdraw concessional tariff of five export-oriented sectors and agriculture tube wells from March 1, 2023.
According to NEPRA’s decision, Power Division, on March 7, 2023, has intimated the following decision of the Federal Cabinet of February 28, 2023; (i) discontinuation of concessional tariff being provided @ Rs. 19.99/kWh all-inclusive to the five export-oriented sectors from March 1, 2023; (ii) discontinuation of special relief of Rs.3.60/kWh provided to the private agriculture consumers in their current base rate of Rs. 16.60/kWh from March 1, 2023.
It is pertinent to mention that the export-oriented sectors, including the textile industry, have been facing criticism from different quarters over getting subsidized gas and electricity at the same time. The textile sector had captive power plants meant for producing electricity in case they did not secure power from the national grid. These textile units had been receiving electricity and gas at discounted rates at the same time. The previous government linked the provision of gas to the textile units with the performance audit of the captive power plants.
The petroleum division conducted a study explaining that while sales from textile mills had increased locally, there had not been a substantial increase in textile exports. There had been a misuse of the gas subsidy provided to the captive power plants as those textile units were also receiving subsidized gas.
The government’s decision to withdraw subsidized gas tariffs to the export-oriented sectors will help reduce the burden on the national exchequer. However, it remains to be seen how these sectors will cope with the increased costs and maintain their competitiveness in the global market.
Overall, the government’s decision is a bold step towards rationalizing energy prices and ensuring that sectors do not receive undue benefits at the expense of others.
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