Dispute over gas supply to captive power plants

The Ministry of Finance and the Petroleum Division came face to face to end gas supply to Islamabad Industrial Electricity Plants by January. It should be noted that the IMF had imposed a condition while approving the $7 billion loan package that the government would end gas supply to industrial electricity plants by January 31, 2025. However, now a dispute has arisen between the two institutions at the implementation stage. In a meeting held at the Prime Minister’s House, the Petroleum Division claimed that despite our reservations, the Ministry of Finance accepted this condition of the IMF. Implementing the condition could result in a loss of Rs 427 billion to the government and industries. However, the Ministry of Finance rejected the claim of the Petroleum Division and said that the Petroleum Division was fully willing during the negotiations, but is now changing its position. It should be noted that this dispute arose after the Petroleum Division’s review, in which it was revealed that it would take 2 years for industries to completely shift from gas to electricity, which It shows that Pakistani authorities did not do the necessary homework while signing the agreement with the IMF and signed the agreement without any preparation, the losses of which are now coming to light. Sources say that the matter has come to the notice of Prime Minister Shehbaz Sharif and he has held 2 meetings to resolve the issue, but despite this, the issue has not been resolved, while 4 meetings have also been held with the IMF. Sources say that a tense situation was also seen in the meeting held at the Prime Minister’s House. A minister had taken an aggressive approach while defending his position. The Petroleum Division estimates that the loss of billions of rupees will be due to the disconnection of gas supply, of which 100 billion rupees will be lost only in the form of cross-subsidies, which are collected from industrial consumers to provide cheap electricity to domestic consumers. The aim of this condition of the IMF is to increase the declining consumption of electricity so that the cost of production can be reduced. It should be noted that the cost of electricity to industries from captive power generation is Rs 30 per unit, which will be Rs. 40 per unit despite the relief given in July in case of electricity supply from the National Grid.