Prioritize gas consumption

Since last summer, federal minister for petroleum and natural resources Dr. Asim Hussain has been consistently issuing warnings of natural gas loadshedding in the winter months. A gas load management plan was finalised after due deliberations with all stakeholders before it was presented to the Economic Co-ordination Committee (ECC) of the Cabinet in the third week of November for approval. Duly approved by the ECC, the plan envisaged, among other things, rotational shutdown of urea fertiliser plants as well as conversion of gas-fired electricity plants to diesel. Unfortunately, however, the plan was put in abeyance by the Prime Minister in less than 24 hours of its approval. The two-day plan to shut down Compressed Natural Gas (CNG) stations in the Capital areas could not be implemented because of a court order. In this case, the government has taken a plea that the court granted stay without affording it an opportunity to present its case. Political and at times judicial interference in a professional approach to handle the natural gas shortage in peak season, unfortunately, has accentuated the present crisis. Over two years ago, the country witnessed an acute shortage of sugar. Supreme Court of Pakistan's attempt to lower the retail price of this commodity just could not materialise. The advice of amicus curiae to the Supreme Court in the case, the then Chairman of Competition Commission of Pakistan, Khalid Mirza, on the issue was: "The court can decide to have sugar available to the people of Pakistan at a price or not have sugar at a price fixed by the court." The court decided to fix the price of sugar at Rs 42 per kilogram. Was sugar ever available at this price after the judgement? Certainly not. Prices of commodities are greatly dependent on a number of various elements, including supply-demand concept, which is an economic model of price determination for a market price. Therefore, price is a reflection of supply and demand. Same applies to LPG cylinders and urea bags. Prime Minister Gilani's decision to postpone the implementation of the gas loadshedding plan and order that urea producers receive uninterrupted gas supplies may have got him brownie point with farmers' lobby, but his action has certainly contributed to the urban unrest as domestic consumers are now receiving painfully low pressure of gas, which makes cooking a profound ordeal or an arduous task for a housewife. Lower pressure of piped gas is also due to a decision to keep CNG pumps, mainly owned and operated by members of parliament and other powerful lobbies, open. Pakistan's current gas shortage is result of a long history of mismanagement of this sector by successive governments. We have kept the price of this precious resource irrationally very low compared to other competing thermal resources. We also kept postponing development of infrastructure for importing natural gas for decades. Pricing mechanism of domestically produced natural gas and LPG has not allowed the private sector to come forward and invest in the import of LPG and LNG. And, on top of it every successive government expanded the network of piped natural gas to its constituents as 'pork barrel' projects to garner votes. But this is now history. Investment in countrywide seismic survey, data processing and drilling rigs has just started. The pay back will take years. Looking forward, we need to recognise that the country will have to manage the natural gas shortage and prioritise its use. Obviously, the first call on this precious energy resource has to be industry. Within the industrial sector - textiles must get priority for both natural gas and electricity. This industry is not only the biggest employer but also earns 60 percent of export dollars. With these dollars Pakistan can import furnace oil and diesel for producing electricity as well as urea fertiliser. After industry, the second call on natural gas consumption has to be the fertiliser producers since the country needs to feed its people as well as raise agri output to meet other needs. From an employment-generation perspective, industrial and agri sectors need to get priority over other users. But no government in Pakistan can afford to annoy domestic consumers because they have capability to bring its downfall through popular unrest. An incumbent government, therefore, runs the risks of losing the next election whether people go to the polls in 2012 or 2013. Natural gas loadshedding is here to stay for well beyond 2011 unless the plan to import and enhance domestic production materialise. And the natural gas loadshedding problem can become more complex if they do not act now. It is very unfortunate that the PPP-led government did not learn the lessons from its predecessors. PML(Q) was routed in the 2008 elections mainly because of 'atta' shortages and power shutdown. Now nearly four years into their term, the present ruling dispensation should have effectively tackled the circular debt crisis to obtain electricity at full capacity. It has, therefore, provided a lot of ammunition to its detractors to launch vitriolic attacks on its non-so-shining performance. It must not lose sight of the fact that high inflation and joblessness, energy shortages, a precarious law and order situation and strong perceptions of all-round mismanagement and corruption have only added to an ordinary citizen's plight as he enters the New Year. Copyright Business Recorder, 2012