The prioritization of natural gas

Prioritisation of natural gas has long been an issue of debate in Pakistan and a consensus view is still found wanting. As winters approach, natural gas shortage has again forced the government to revert to gas load management plans by curtailing gas supplies to various users on case to case, periodic basis. Fertiliser is one industry, which has of late been the victim of interrupted gas supply which has led to less than optimal production, hence more imports. Arguments keep coming from both sides, swinging wildly for and against. It has to be kept in mind that the loser in the end turns out to be the end user as shortage of gas results in inflated urea prices, which in turn affect farm yields and output prices. There is no denying the severity of gas shortage especially in the winters which forces the government to manage the load in a way that suits it best. But the fertiliser industrys claim has substance, as natural gas is the basic raw material for urea manufacturing unlike other industries which can run on alternative fuels, albeit at an expensive rate. In an ideal scenario, complete allocation of natural gas to fertiliser plants enabling them to operate at optimal capacity would do wonders. But, it is not an ideal world that we live in, so a compromise has to be reached. Had the countrys fertiliser plants been running on full capacity, Pakistan would not have been importing urea. This would translate into a lower import bill to the tune of $400 million. Besides the ease to the balance of payments, another cushion of roughly $280 million would come in the form of savings on subsidy that the government offers on imported urea. Persistent gas shortage has resulted in numerous rounds of urea price increases; the axe of which falls either on the farmer or end consumers. The recent hike in wheat support price is a perfect case of the unavoidable inflation tax which the consumers will now have to bear. But there is no gain without pain and this is the very reason behind the governments affinity to choosing the middle ground when it comes to deal with gas prioritisation. It is argued that exempting the fertiliser industry from gas load shedding would mean added oil imports, primarily for the power sector. The power sector of Pakistan is already ailing, and inefficient power plants contribute significantly to the acute power shortage. The efficiency of a large number of power plants to run on dual fuel has been less than satisfactory, which is why no gas availability would mean worsen the power shortage. Furthermore, over reliance on oil-based power generation would also inflate power tariffs and further deteriorate the energy mix. The spectre of circular debt is already swinging over the countrys economic prospects and any further dependence on oil imports would also agitate the fragile balance of payments. Given its precarious debacle, the government appears caught between a rock and a hard place. So a middle ground has to be found; balancing the act which puts little strain on both the fertiliser and the power sector, till the time self-sufficiency is attained in natural gas.