The federal government of Pakistan is seeking a 6-month delay in the International Monetary Fund’s (IMF) demand to disconnect captives power plants (CPPs) from the gas supply by January 2025. A high-level meeting chaired by Finance Minister Muhammad Aurangzeb on Thursday discussed this issue and resolved to persuade the IMF to lift the condition.
The meeting also highlighted the planned gas tariff increase for industrial users, which will be adjusted to match RLNG (Regasified Liquefied Natural Gas) costs starting January 2025, to encourage greater consumption of grid electricity.
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During the meeting, Commerce Minister expressed concerns about declining foreign exchange inflows and the potential damage to exporters’ confidence. Additionally, there were worries over the grid’s ability to provide stable electricity.
Petroleum Minister Musadik Malik emphasized that CPPs currently contribute Rs. 150 billion in cross-subsidies for domestic gas consumers. He cautioned that diverting 350MMCFD of gas from CPPs to domestic users could worsen gas sector losses, circular debt, and hamper efforts to reduce electricity tariffs.
Power Minister Awais Leghari supported transitioning CPPs to the grid, noting that it would help improve the use of indigenous gas at national power plants, potentially reducing electricity tariffs. However, he acknowledged that connecting industries to the grid would take over a year to implement and would require Rs. 25 billion for necessary infrastructure upgrades.
The meeting decided to compile and present detailed data to the IMF mission for further negotiations.
