Pakistan has more or less 12 million households connected to the natural gas pipeline. That leaves double the number without pipeline gas. But they still have heating requirements. Some use cylinder gas, whereas the bulk uses firewood. Despite being a bigger use case than natural gas, firewood prices hardly ever get a mention. Anywhere.
Consider this. Firewood price has increased 51 times since FY76 – from Rs14 per 40 kg to Rs735 per 40 kg in FY21. Standalone, this does not tell much, as prices for most items have gone up by as much or even higher in the same timeframe. Considering that firewood is the main fuel source for burning needs of majority of Pakistanis – the price increase warrants more attention.
This is where comparison with the other alternate fuel price comes in play. Pipeline natural gas prices in the same period have only risen by 10 times. Yes, only ten times over 45 years. You often hear how domestic consumers have been paying ridiculously low rates for heating and cooking – while industrial and commercial users continue to subsidize domestic usage. The comparison with the heating cost for the less privileged and predominantly rural user, raises more questions on the rationale and fairness of the gas subsidy for domestic pipeline gas consumer.
Now, on to the heating cost comparison. In terms of heating value, using the most sophisticated wood stoves and heating techniques, it costs a little over $6/MMBTU for cooking and heating use case from firewood. Now, compare that to the pipeline natural gas price for the lowest slab domestic consumer, which is the best comparable to firewood use case. Pipeline natural gas price for the lowest consumption category currently sits at $0.82/MMBTU – seven times cheaper than firewood heating.
Even if the bar is raised to average domestic consumer price for pipeline natural gas – the differential with firewood remains higher at 2.1 times. The firewood market size for heating purposes is estimated somewhere between Rs220-250 billion (as per Household Integrated Economic Survey 2018-19), more than twice the size of domestic natural gas at current prices. Natural gas pricing is already distorted now that more and more LNG is being used for domestic consumption in peak demand season – and the budgeted subsidy is not sufficient, at only Rs10billion against the need for Rs3040 billion annually.
The cross subsidy to domestic natural gas is estimated at around Rs70-80 billion per annum. One wonders why the blatant disparity goes unnoticed. When the least privileged users can pay six times as much, surely the more privileged can at least be made to pay the actual cost. Politically tough as it may sound, it will bring much more judicious use of the precious and fast depleting natural resource and would eradicate the disparity with firewood users.