Cabinet committee decides to end 66pc of take-or-pay condition under GSAs from January
ISLAMABAD (City News) – Cabinet s Energy Committee on Friday decided that from January 2022, 66 percent of Take-or-Pay condition under the Gas Sales Agreements (GSAs) would be removed and the gas companies would be free to market and sell the additional gas to other customers.
Petroleum Division will take all mitigation measures to reduce the cost impact on gas sector and to avoid build up of liabilities and the government will fund any revenue shortfall for the publicly listed companies, if required.
The meeting was presided over by Minister for Planning, Development, and Special Initiatives Asad Umar.
The meeting discussed the proposal of Power Division for waiver of minimum 66 percent Take-or-Pay commitment in Power Purchase Agreements (PPAs) and GSAs of Re-gasified Liquid Natural Gas (RLNG) plants and Firm Gas Commitment to be finalized based on the Annual Production Plan of Power Sector.
The previous government signed expensive LNG import contracts without any firm demand.
This LNG was loaded on the PPAs of Government owned Independent Power Producers (IPPs) as Take or Pay commitment at 66 percent of the plant capacity.
These plants have to be run at this capacity even if there are cheaper options available due to such contracts, thus making the electricity unaffordable.
Changing the contracts structure will not only make the electricity cheaper but also significantly reduce the circular debt buildup in coming years.
Minister for Planning on the occasion said that the decision would bring overall efficiency in the energy sector.
The Minister also stated that sustainable and affordable supply of electricity and gas was the corner stone for the overall socio-economic development of the country and a number of steps were being taken in this regard.
The meeting was attended by Minister for Energy Omar Ayub Khan, Federal Minister for Information and Broadcasting Shibli Faraz, Fedreal Minister for Railways Sheikh Rasheed Ahmad, Minister for Maritime Affairs Ali Zaidi, Special Assistant to Prime Minister (SAPM) on Petroleum Nadeem Babar, SAPM on Mineral Resources Shahzad Qasim and senior official of various Divisions.