Last update: Wed, 10 Feb 2016 11am

Pressure politics on gas, while electricity shortage looms

 Pakistans premier industry is running appeals pointing out the horrendous consequences of gas curtailment faced by the textile industry. This is not the first time the industrial sector has locked horns with the government over gas load shedding, asking it to go for a more equitable distribution of precious resource that natural gas becomes in winters. Expectedly, the industries, in general, and the textile sector, in particular, have raised concerns on the allocation of gas to the fertiliser sector which was fully restored after having faced load shedding briefly last month. The textile industry wants gas load shedding which currently stands at three days a week for the winters, not to extend beyond two days a week. They argue that curtailment of gas supply results in massive losses to the economy, as thousands of workers get unemployed as factories come to a halt. It should be remembered that natural gas is not a raw material for the textile industry, and there are alternative sources of fuel available, albeit, at considerably expensive rates. Ideally, a breakdown in natural gas supply for three days a week should not result in closure of factories, especially when the industry seems content with two days load shedding and when the alternative fuel sources are abundantly available. One concedes that textile sector earns dollars for the country. These dollars can be used to import fertilisers as well as petroleum products. Plus, this industry is the largest employer in Pakistan. But then Pakistan is still basically an agrarian economy. And more than half of its population is involved in the farm sector. Do the math as they say. And it does not portray a good picture for the proponents of diverting gas from fertiliser to other industries as the cost benefit is tilted hugely in favour of the fertiliser industry. If the industries are forced to switch to alterative furnace oil, the cost would be nearly $22/mmbtu. Conversely, if gas stoppage results in urea imports, it would cost $41/mmbtu, of which $29/mmbtu would be direct import cost and the rest would be paid by the government in the form of subsidy to equate prices with the local market. It is no rocket science to judge which one is the better option as importing furnace oil would be less of a burden on the foreign exchange than importing urea. Interestingly, fuel and power cost constitutes hardly 8~9 percent of the overall cost of sales for textile manufacturers, which could be verified from the accounts. How a dent on a portion of cost, which is one-tenth of the total, warrants a complete closure of the business is beyond logic and something that the industry players need to answer. The real focus has to be on clearing the circular debt of the IPPs. By 20th of this month, we may witness major electricity load shedding reminiscent of October. Remember, hydro-power cannot make up for the loss of thermal power especially in winters. Take action before people come out on the streets again. The Ministry of Finance needs to pay up.