Energy pricing and recoveries are getting out of the control. The new PM wishes to run things at high speed while the world order is to utilize the speed in opposite direction by applying brakes; otherwise, the system could breakdown. The removal of petroleum subsidies has become the core issue of national security, political capital and of course the economic sovereignty by bringing IMF and other lenders on board.
The less discussed issue is growing gap in the cost and pricing of gas and electricity. That is going to hurt badly – not only in terms of growing external vulnerabilities by importing LNG and other fuels at exuberant rates but also due to unabated consumption by not forcing the demand to slow through pricing and administrative measures.
The LNG transmission weighted average sale price for SSGC is at $19.7/mmbtu and the distribution price is at $23.7/mmbtu. The price for SSGPL is at $20.1 (transmission) and $21.8 (distribution). The UFG is estimated at 17.25 percent for SSGC and 8.5 percent for SNGPL. How can gas distribution companies recover at this price. One may wonder, what was in the mind of the government when it bought the spot cargos at exuberant prices. How can industry cross subsidize at such a high rate?
The rule of thumb is that when price increases, theft increases both in power and in gas sectors. Then the noise in the industry is that new government ministers and MNAs are getting new gas connections and providing indigenous gas to their favorites. The old way is back and there is no check, as the government is weak and has many things on its plate. In case of certain industries and CNG stations, there might be case of assisted thefts. Without demand destruction and barring new connections, the situation could worsen.
The government needs to take tough measures to some extent. The working week must be reduced to 3-4 days. Shut the shopping malls and commercial areas by 6 PM. Limits public gathering to 200. Have forced load shedding in residential areas. Encourage carpool and increase the number of busses on roads. And whatever else works.
Then make it mandatory for government and private offices, hospitals, educational institutes, and commercial areas to have air conditioning at 27 degrees. Use government ads for creating this awareness rather than running ads for foreign trips. The civilized and developed world is doing that. So should Pakistan.
Stop buying LNG at spot. Lower the imports of other fuels. Manage refineries’ margin to lower the subsidy amount. Plan for winters. Think on serious lines to buy gas from Russia. India and China are doing it. Don’t waste time. Do these before actual sanctions on oil and gas purchase from Russia take place.
Doing nothing and letting fuel import bill to grow can have disastrous consequences. The problem is getting worse day by day. There is no time for politics. The national action plan should be to destruct demand as much as you can.