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Punjab’s Exporters Angry For Getting Higher Gas Prices Than Sindh

Punjabi industrialists have entered a spitting contest with their Sindhi counterparts after the recent increase in gas prices made manufacturing a hefty affair for export-oriented producers.

The All Pakistan Textile Mills Association-North demands that the government abolish differential gas rates for export-oriented industrial units in Punjab and Sindh in favor of a uniform price of $7 per million British thermal units (mmBtu).

The Petroleum Division on Monday informed the Economic Coordination Committee (ECC) of the federal cabinet to revise gas prices for residential and other categories of consumers which would generate a revenue of Rs. 310 billion as against apportioned Revised Estimated Revenue Requirements (RERR) for the six months (January to June 2023) of Rs. 305 billion.

Following the increase, Punjab-based industrialists are expected to pay $9 per mmBtu, nearly three times the gas rate enjoyed by their Sindh-based counterparts.

Analysts suggest the energy price disparity put Punjab-based industrialists at a cost disadvantage. The export industry is taxed based on turnover rather than profit. As a result, all excess profits from energy cost savings will go directly into the pockets of Sindh-based industrialists. This disparity in gas prices for export-oriented units is unjustified, pitting one group of industrialists against another for no reason.

Others have warned the policy is bad for investment and will discourage manufacturers already struggling to get their hands on essential raw materials due to import restrictions as the country lacks dollars to pay off containers at ports.

Sui Southern Gas Company Limited provides approximately 350 million cubic feet per day (mmcfd) to industry and captive power plants, including export and non-export. With a $5 per mmBtu price difference between export-oriented units in Sindh and Punjab, the cost advantage to the industry in the south is at least $575 million per year.

The Constitution makes it clear that the province that produces gas has the first right to use it. While Sindh supplies a significant portion of Pakistan’s natural gas, industrialists in Punjab want uniform rates to bring both provinces on equal footing and bridge differences in manufacturing prices.

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