Hopium – I

Stubborn refusal to look reality in the face and wishing for good daddy saviour has been our norm since 75 years, advocacy of non-realistic planning, inability to take timely decisions, lacking focus on home-grown measures, not taking the proverbial bull by the horn is continuously replaced by dreaming of biogas, hydrogen, creating a market for rice stubble, renewable energy potential and coal gasification as our saviour.

Only a country with an analytical mind can find real solutions and not go by believing in fantastical things being done in the West. There is a time lag in ability and execution and according to the UN trade chief, the rich world uses green policies to hold back the poor world.

History shows the gestation period for structural changes, project development and execution with disconnect with policy and 5-year plans is void of action plans and strategy. Evaluation of Thar, Reko Diq, EXIM Bank, privatization, hydel and nuclear projects, including other structural reforms will reaffirm this inability and also identify process improvements to bring the change- if we want to. The question, however, remains: who will bell the cat?

Our Planning Commission must become the equivalent of the Chinese NDRC, which was established as the State Planning Commission in 1952: third-ranked executive department (constituent of the State Council/Cabinet) functioning as a macroeconomic management agency with broad administrative and planning control over the economy of mainland China.

Its subsidiary is the National Data and National Energy Administration responsible for energy policy, decision-making, formulating development strategies, coordinating energy development as well as international cooperation on energy.

Earlier suggestion of PIDC is essential.

The ‘Ostrich phenomenon’ has continued and there have been meaningful efforts in spurts to develop alternative sustainable resources based on individual initiatives rather than a well thought-out plan with timely decisions.

A new beginning has to take place with the 13th Five-Year Plan (2024-2029) by discarding hopium and challenging Winston Churchill who said, “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”.

It has been repeatedly confirmed that raising tariff does not reduce circular debt and is contained by regular increase in line with cost. Reduction requires distinct alternate measures in parallel. The chart below by DEA Pakistan depicts the need to price energy in a understandable unit so as to enable comparison and fuel choice by consumer and industry.

Since many decades, National Energy Efficiency & Conservation Authority with EDB should have followed a target driven aggressive energy conservation and equipment efficiency program.

We need to start again aggressively and energy conservation with measureable targets of 2% improvement every year by 2029 or saving of 2.2 MTOE of energy and 8.29MTCO2 per NEECA current goals.

Energy security scenario planning (Pakistan Energy Outlook 2010/11 prepared by author) determined action to reduce energy import dependency and regular plan updates would have determined a rolling road map of enhancing productivity, need to build a trading portfolio with long-term agreements directly with liquefaction facilities and refineries instead of expensive spot procurement, developing gas storage in depleting fields, E&P focus shift to offshore, understanding criticality of regional cooperation and in becoming part of energy networks evolving in our surrounding.

A 5+5 year revolving planning strategy to diversify energy import sourcing had to be driven by geo-economic and regional cooperation to ensure economic security as we build on our geostrategic focus.

It now needs to define fuel mix based on IGCEP (indicative general capacity enhancement plan), energy transition fuel (pipeline gas/LNG), coal with target of 60% RE independently and taking into account Economic Corridor from India to Europe, sourcing fuel out of North American Energy Platform, LPG from Iraq, Central Asia, Saudi Arabia, Russia, Silk Road Rail Access to the Mediterranean Sea and commercial long-term engagement with Qatar, Oman, the UAE, Australia, USA, Saudi Arabia and Russia.

Continued rethinking due to growing need of energy infrastructure, depleting reserves and dependency on imported fuel would have also determined energy provision to consumer in form of only electricity and 5.7m gas consumers would be delivered piped gas at imported LPG or LNG price (whichever is higher) with cross subsidy/slabs done away and monthly direct subsidy to 70% of population using LPG and wood would focus on measures to reduce “dole” by recipients under a time driven skill development program.

We have started to walk the talk and a home-grown solution for captive power plants has introduced a 50:50 blend for 9 months and 100% LNG for 3 months (this year additional benefit for a month has been given). For industrial units, 75:25 blend for 12 months in Sindh and Punjab is presently at $9.7396 and $10.8478/mmbtu with increased gas load shedding, CNG being priced at LNG cost and going forward spot buying of LNG for consumer to be phased out by 2025.

These ratios will change depending on availability and application only to zero-rated industry registered till June 2022, needs to be done away and Tax, Import Duty, ST subsidy needs definition and be given to all listed firms based on increase in audited exports value, tax paid, volumes increase, investment and/or increase in employment under a progressive “slab” system with blacklisting of audit firms misreporting above in annual accounts including extending Foreign Investment Promotion and Protection Act (FIPPA) to them.

Plans are also being considered to reduce industry subsidization of consumers and to ensure consistency of pricing; court stay and APTMA lobbying will delay matters. Citing Bangladesh has backfired as it went under an IMF programme; now needs to manage its $5bn circular debt with increasing CAD. Our refinery industry has now started to export furnace oil when pushed and rent-seeking was denied.

Long overdue deregulation of oil and gas sector starts by rescinding the Marketing Petroleum Act., Oil Marketing Companies determining provincial or national retail price, doing away with Inland Freight Equalization Margin, removing anti-competitive clause in white oil pipeline hindering Pakistan Railways freight growth and RON differential, high sulphur penalty and regulatory duty being used to build strategic fuel reserves.

Furthermore, a deregulated environment also requires removal of monopoly of Fauji Oil Terminal and Distribution Company on import infrastructure in Port Qasim, rebuilding oil piers in KPT on priority, connecting the two ports by pipeline pending close to over a decade.

Copyright Business Recorder, 2024