LAHORE, April 27: The textile industry on Wednesday called upon the government and the Oil and Gas Regulatory Authority (Ogra) to freeze gas tariffs for textiles and other industrial units at the current level.
Speaking to reporters at a press conference, Aptma members Amir Sheikh, Shahid Malik and Naveed Sheikh opposed the raise demanded in gas tariff by two gas utilities — SNGPL and SSGPL.
They said their tariffs for the industry should be frozen at the current level and a decision should be taken only after carrying out an in-depth study of consequences of such an action.
In their petitions to Ogra, SSGPL has asked for an increase of Rs30/mmbtu and SNGPL Rs16.18/mmbtu.
“The gas tariff for the general industry in Pakistan is Rs7.23 per unit. This compares to Rs4.46 per unit in Bangladesh. If Ogra allows the increase, the actual impact on the industry could be 60-80 per cent higher. It’ll push up our production cost and reduce our ability to compete with our main competitors,” they said.
The Aptma members said SNGPL was selling gas to its industrial consumers at Rs240/mmbtu while it was costing the supplier Rs204/mmbtu. On the other hand, they said: “Fertiliser manufacturers and domestic users of gas were getting gas at subsidised rates.” While domestic users’ lowest slab was Rs91/mmbtu, fertiliser makers were paying Rs81-88/mmtbu. One fertiliser producer, they said, was paying only Rs36/mmtbu.
“This means that the industry is forced to pay a cross subsidy of Rs15 billion to domestic consumers and fertiliser makers a year. The domestic customers were getting total subsidy amounting to Rs10 billion and the fertiliser makers Rs5 billion, which was not fair to general industrial units,” they said.
They said fertiliser producers were getting the subsidy as the government wanted to subsidise the farmers. However, they said, the entire subsidy was being pocketed by the manufacturers of fertilisers as was evident from their huge profits. “The government should directly subsidise the farmers from its own pocket instead of laying the entire burden on the general industry,” they demanded, saying such a policy would only render the export-oriented industry uncompetitive in the international markets.
The Aptma members said the gas utilities had proposed increase in their rates on the pretext that they had projected an investment of Rs11 billion each on expanding their infrastructure during the fiscal year 2006-07. “The projections seem ambitious, and it is impossible to achieve this kind of investment,” they added.
They also termed 17.5 per cent return on net operating fixed assets unjust, saying allowing guaranteed return could not be described as fair and just. Moreover, they said, the investment meant to increase assets of the gas companies and earn greater return on them.
The Aptma members said the textile industry had initially made an investment of Rs12 billion and put up 403.5mw furnace oil-based electric generation. “With the increase in furnace oil prices, all the investment in the furnace oil-based power generation had become redundant.
