KCCI President's Concerns:
Muhammad Jawed Bilwani, President of the Karachi Chamber of Commerce and Industry (KCCI),
expressed serious concern about the government’s decision to suspend gas supply to Captive Power
Plants (CPPs) by 2025, as mandated by an agreement with the International Monetary Fund (IMF).
Impact on Industries:
Bilwani warned that this decision could lead to widespread closures of medium and large-scale
industries, resulting in significant losses in investments in CPPs.
Call for Government Action:
He urged the government to engage the IMF to reconsider this condition, stating that failure to do so
would cause irreparable damage to the economy and lead to mass industrial closures.
Background on CPPs:
Bilwani highlighted that the government had previously encouraged the establishment of CPPs, assuring
uninterrupted gas supply during an electricity crisis. This encouragement resulted in significant
investments, with CPPs being 64% more efficient than Independent Power Producers (IPPs).
Reliability of Power Supply:
He noted that many industries rely on CPPs due to K-Electric’s inconsistent and unreliable power supply,
which can disrupt sensitive machinery and halt production processes.
Current Electricity Production:
CPPs are producing between 600-800 megawatts of electricity, which industry stakeholders fear cannot
be matched by K-Electric due to its limited production capacity.
Economic Implications:
Bilwani raised concerns about the potential diversion of industrial gas to the domestic sector or IPPs if
CPPs close, leading to increased subsidies for the government and enhanced line losses.
Cost Comparison:
He pointed out the price difference between indigenous gas supplied to CPPs (Rs3,000 per mmBtu) and
re-gasified liquefied natural gas (RLNG) (Rs3,788 per mmBtu). He warned that closing CPPs could
complicate the gas supply situation.
These points summarize the concerns raised by the KCCI president regarding the government's gas
supply decision and its potential negative impact on the industrial sector and the economy.
You said:
what will be the effects of this dicission on pakistan
ChatGPT said:
ChatGPT
The decision to suspend gas supply to Captive Power Plants (CPPs) in Pakistan by 2025, as part of the IMF
agreement, could have several significant effects on the country:
Economic Impact
Industry Closures:
A widespread closure of medium and large-scale industries could occur, leading to significant job losses
and a reduction in economic activity.
Investment Losses:
There may be a substantial loss of investments in CPPs, discouraging future investments in the energy
sector and industrial growth.
Increased Costs:
Industries may face higher energy costs if they have to switch to more expensive alternatives like RLNG,
increasing overall production costs and reducing competitiveness.
Supply Chain Disruptions:
The closure of CPPs could disrupt supply chains, impacting not just the energy sector but also other
industries dependent on reliable electricity.
Energy Sector Implications
Increased Reliance on IPPs:
Industries might have to rely more on Independent Power Producers (IPPs) that may not be able to meet
the demand, leading to further electricity shortages.
Gas Allocation Issues:
Diverting gas from CPPs to domestic sectors or IPPs could create shortages for both, leading to broader
energy crises.
Higher Subsidies:
The government may incur higher subsidies to support energy supply to sectors that lose access to gas,
straining public finances.
Social Consequences
Job Losses:
With industries closing, significant job losses could occur, leading to increased unemployment and social
unrest.
Inflationary Pressures:
Higher energy costs could contribute to overall inflation, affecting the purchasing power of consumers
and further exacerbating economic difficulties.
Public Discontent:
The decision could lead to public dissatisfaction with the government’s handling of the energy crisis,
potentially leading to protests or political instability.
Long-Term Considerations
Energy Policy Reevaluation:
This situation may prompt the government to reevaluate its energy policies and strategies to ensure a
more sustainable and reliable energy supply in the future.
Shift Towards Renewable Energy:
The crisis could accelerate the transition toward alternative and renewable energy sources, though this
would require time and significant investment.
Conclusion
Overall, the decision to suspend gas supply to CPPs could have far-reaching consequences for Pakistan’s
economy, energy security, and social stability. Immediate action to mitigate these effects and explore
alternative energy solutions would be crucial to avoid a deeper crisis.
