Sindh gas price hikes push businesses to alternative energy

The government has raised gas prices for captive power plants in response to conditions set by the International Monetary Fund (IMF). This increase, along with additional charges, is making it hard for efficient plants to operate. Many are now looking for other energy sources because the power grid is too costly and unreliable. In February 2025, the power sector was underutilized, reaching its lowest level in five years. Some plants may switch to the grid, but this could lead to a surplus of gas, which may force local gas production to stop and increase debt in the gas sector as top-paying customers seek alternatives. In Sindh, industrial gas prices have surged from Rs1,100 to Rs3,500 per mmbtu in under two years. Although prices in northern regions rose less, the new levy of Rs791 per mmbtu is pushing many to consider moving away from the grid. One textile manufacturer plans to challenge the levy in court and expand his solar capacity instead of using the grid, where rates are high. Others in the industry are exploring similar options. The frequent power outages—tripping events—often disrupt operations, especially in processes like dyeing fabric. Some businesses are turning to alternative power sources like biomass and coal, despite the potential rise in costs and impacts on their growth. In the southern region, connecting to the K-Electric network requires significant investment, leading some to consider alternatives despite fewer outages in that network. The power ministry is considering lowering tariffs to encourage a shift to the grid, aiming for prices between Rs22 and Rs24 per unit. If this plan gets IMF approval, it might help lower grid underutilization. However, the surplus gas problem will persist. Currently, 18 RLNG cargoes per year are surplus, and this number could rise if captive consumers leave the market, leading to increased domestic gas cuts. The situation creates financial challenges, especially for cost recovery, as domestic prices are lower than RLNG. Executives from gas companies are hopeful that industrialists will be able to delay legal actions that could affect the energy sector's future. The ongoing issues reflect the complexities facing Pakistan's energy landscape.