LAHORE - The new government of the PML-N kept on favouring big players of cement as well as textile, as meager increase of just 17.5 per cent in the rate of gas for Captive Power Plants (CPP) has created a discriminatory atmosphere amongst manufacturers because energy cost of wet and dry plants has a huge difference yet.
“The government is creating undue advantage for Captive Power Plants, mostly installed by big cement and textile players, by providing them gas supply at very nominal rates to generate cheap electricity while rest of the industry is being charged Rs Rs15.12/kwh for power utilization,” industry sources told The Nation.
They said that presently, there are 24 operative cement plants in the country, out of which at least 9 cement plants, representing 54% of the total installed capacity of the cement sector, have the privilege of generating electricity from subsidized gas at their own CPPs.
Sources said that total installed capacity of these CPPs of cement sector is approximately 350MW that gobble 85 mmcfd of gas at subsidized rates, which is 20% of total gas allocation to CPPs of the country.
After the recent increase in gas rates for CPPs, one unit of electricity produced from CPP costs Rs7.15 inclusive of operational cost while electricity rates from national grid are Rs15.12 per unit resulting in a whopping difference of Rs8 per unit.
Industry sources revealed that 100 units of electricity are required to produce one ton of cement, which gives a clear advantage of Rs800 per ton or Rs40 per bag in cost of production to the plants who have CPPs over the plants that do not have permission to install their own CPPs.
The total cement production for the financial year 2012-2013 was 35 million tons and cement producers availed Rs16 billion at the cost of national exchequer.
It may be noted that government has imposed a ban on new connections for gas based CPPs as they are highly inefficient. Market was expecting an increase of 150% in gas prices for CPPs to stop the drain on the national economy and to create equilibrium in prices of various energy sources.
Market sources further informed that before the increase in electricity and gas rates the differential between the cost of electricity from national grid and gas based CPPs was Rs3 per unit, which has now increased to Rs8 per unit. These gas-based CPPs were installed at least ten years ago and have already received back their investments manifolds and there is no justification left to have any differential in costs of electricity from these two sources.
It is to be noted that the Lahore Chamber of Commerce and Industry has already demanded of the government to immediately increase the price of natural gas being provided to captive power plants to create a level playing field for majority of the industry that has no access to power generation through gas. Industry said that the rate at which the gas is being provided to industrial units having captive power plants is creating disparity in cost of production and would result in closure of larger chunk of industry in the country.
Since the state is providing gas to a selected few industries, it is actually creating undue advantage for those having access to gas. Due to shortage of gas in the country it is not possible to provide it to rest of the industry.
They said that for creating parity in cost of electricity which is a major raw material for the industry, the business community strongly recommended that the gas prices to the captive power plants be increased by at least 150 per cent.