As per the government’s gas allocation policy, power plants are to get gas supply after meeting requirements of domestic, commercial, fertiliser and industrial sectors. It has been noted that the production cost of electricity through gas is one third the cost of producing electricity through furnace oil. Historically, power sector has been the major consumer of gas in the country. Going back, we have seen the power sector consuming 43 per cent of the total gas production of the country in FY05 which has since declined to 28 per cent in FY10.
Consequently, the reliance on power production through furnace oil has resulted in mounting pressure on the government in the form of higher subsidies – resulting in swelling of the inter corporate debt. Government has recently announced to issue PIBs to the banks to somewhat solve the inter-corporate debt (currently at Rs283 billion including all accrued markup). “However, we believe reforms are still required in the form of cutting down power sector subsidies for solving such an issue or else the situation can rise again,” said Naveed Tehsin at JS.
30-09-2011