Energy minister takes credit for ‘painful’ gas price hikes

ISLAMABAD: Outgoing caretaker Minister for Power and Petroleum Muhammad Ali on Tuesday identified recent “painful” gas pricing reforms among the best achievements despite difficulties to the consumers and conceded inability to negotiate debt relief from foreign independent power producers (IPPs) chiefly from China during over six-month stint.

Speaking to journalists before leaving the office, he said the biggest challenge to energy prices emanated from the exchange rate and unless Pakistan stabilised it, the pricing of both gas and electricity would remain unaffordable to consumers, particularly the industrial sector.

He conceded that the caretaker government could not provide relief to the consumers in terms of lower prices but its policy actions to tap gas supply from unconventional fields and improved cash flows of exploration and production companies and gas utilities would reduce import dependence and foreign exchange losses.

The minister said the caretaker government had formulated a power tariff rationalisation plan to allow reduced rates for industry through lower cross-subsidy. At present, the overall cross-subsidy stood at Rs473bn, which would come down to Rs273bn through this plan because unless the industry was able to operate, exports would not grow and foreign exchange inflows would remain stagnant and thus exchange rate would be under pressure. The power would be provided directly through the competitive trading model because the only thing for the electricity rates not to go further up was the currency rate to remain stable.

The minister conceded that one of the major issues relating to expensive electricity — renegotiations with Chinese IPPs for extension in debt tenor — could not be taken up by the caretaker government. He said total payables to Chinese power producers currently stood at Rs511bn. He said the painful gas pricing reforms in two phases had stopped the flow to the circular debt, although circular debt stock of about Rs2.3 trillion was a major challenge for the upcoming government to address. Besides Rs2.3tr gas sector debt, another Rs2.4tr debt stock also exists in the power sector.

Mr Ali said the interim government had been able to induct about 152 million cubic feet of additional gas per day (mmcfd) into the system that had been hampered for years by different issues while another 280mmcfd would also come in during the current calendar year.