It is an unwritten convention that in case two laws militate against each other, the one legislated later will have a clear precedence over the other. This approach based on established precedents and traditions is globally acknowledged. The caretaker Prime Minister has reportedly removed the Managing Directors of the two government-owned gas distribution companies - on a summary moved by their line ministry (Ministry of Petroleum and Natural Resources) - and a notification to this effect has been passed to the respective chairmen of the Boards of Directors of the Companies.
However, the corporate law provides that chief executives of companies have to be appointed by a Board of Directors on a fixed term of three years. They can only be removed earlier by the same Board of Directors under a due process. Normally, the Prime Minister appoints Chief Executives of Public Sector Enterprises. His decision is subsequently ratified by the Board as majority of Directors also comprises Prime Ministerial appointees. Both the selection and removal processes in all government-owned corporate entities are not only faulty but are also reflective of poor governance. This newspaper has always argued for a structural change. Why should the Prime Minister or the Chief Minister enjoy such omnipotent power which leads to nepotism and patronage and is devoid of meritocracy?
Major industrial groups depend on natural gas to operate their large manufacturing units. It is observed that they not only invest in the shares of these companies but also are keen to get their proxies from the government to place directors on boards of these companies so that they can extend and obtain favours. This issue did not come under focus, so long as there was ample supply of natural gas to be distributed all around. Now the position has drastically undergone a paradigm change. Shortages of this cheap but precious fuel have to be shared not only between provinces but also between various classes of users, leading to provincial disharmony and adding to distortions in energy market. Since domestic users are the largest consumers in terms of numbers and an elected government depends on votes, they get the first priority instead of last in the load management plan, leaving the balance of the shrunken pie for distribution between industrial and commercial consumers. Realising that natural gas is now a very precious commodity and the very well-being of the nation's economy depends on it, a load management plan was conceived at the Economic Co-ordination Committee (ECC) taking into account Ogra's view of the sub-optimal use of this national asset and reduction in the unaccounted for gas (UFG) losses. Until July 3, 2012 fertilizer and industrial sectors got priority over power sector. On the said date the government decided to reverse the order and gave power sector higher priority. And, it lowered the priority to industrial and fertilizer sector. The government was forced to do this as operating gas-based power plants on diesel and furnace oil were contributing to ballooning of circular debt. CNG sector was accorded the lowest or 5th priority in the load management plan. But due to the agitional capability of their association and some help from courts CNG has managed to obtain over 80 percent of their gas allocation while the priority sector such as industry and fertilizer received less than half of their allocation provided in the plan. Obviously, this was so because the provincial governments fearing a law and order situation prevailed over the Ministry of Petroleum to continue with gas supply to CNG stations.
The gas load management plan has failed and given rise to serious misgivings and complaints. A logical way to improve the deteriorating gas supply situation is to base the load management plan on the best socio-economic return. One way to do so is to sell gas to the highest bidder and let the nation/government benefit to the fullest extent. Or else, work out the socio-economic benefit to the largest segment of the society ie, which provides highest employment and earns most valuable foreign exchange for the country. Only, right signal through pricing will force the users to choose other fuels besides gas to lessen the pressure on this domestically-produced fuel. The ongoing battle is not just for gas but for the cheapest dependable fuel available in the supply chain. As long as shortages persist, there shall be unsubstantiated allegations against gas distribution companies. The use of kickback payments as well as political connections will also persist.
Economic issues need to be tackled through economic means. Not doing so is a recipe for failure. Unless the issue of natural gas distribution is tackled properly just like sharing of river waters equitably and judiciously it could tear the federation apart. After all both these natural resources bind us as a nation. Last but not least, the directors are representing shareholders and are required to maximise profit, the situation can be less straightforward in monopolies companies.
It is the responsibility of the regulator (Ogra) to protect the interest of the consumers. The government must sell its ownership stake in the two gas companies to help improve these companies' future growth in an enabling environment in which no competitor is denied a level playing field. After all, the government is not always obliged to actually provide gas at cheapest possible rates in total disregard of market-based pricing. Secondly, government has no business dabbling in business.