The federal government seeks a 6-month delay in the International Monetary Fund’s (IMF) demand to disconnect captive power plants (CPPs) from gas supply by January 2025.
A high-level meeting chaired by Finance Minister Muhammad Aurangzeb on Thursday deliberated on the issue and decided to persuade the IMF to lift the condition. It bears mentioning that the gas tariff for industrial users will be raised to match RLNG costs starting January 2025 to increase grid electricity consumption.
At the meeting, the Commerce Minister warned of declining foreign exchange inflows and damage to exporters’ confidence. Concerns were also raised over the grid’s ability to provide stable electricity.
Petroleum Minister Musadik Malik said CPPs currently contributed Rs. 150 billion in cross-subsidies for domestic gas consumers. He warned that redirecting 350MMCFD of gas from CPPs to domestic users would hurt gas sector losses and circular debt and prevent the reduction of electricity tariffs.
Power Minister Awais Leghari supported the transition of CPPs to the grid as it would help improve the usage of indigenous gas at inefficient national power plants to reduce electricity tariffs. However, he admitted that connecting industries to the grid could take more than a year to implement and require Rs. 25 billion for infrastructure upgrades.
The meeting decided to present detailed data to the IMF mission for further negotiations.