EDITORIAL: The Shehbaz Sharif-led 11-party government has decided to give top priority to the domestic sector for supply of gas this winter. Granted that the decision to prioritise domestic sector over all others, including productive sectors that have a direct link to the Gross Domestic Product growth as well as available employment opportunities, was taken by previous administrations as well; however, none of the previous administrations claimed that it was taking politically unpopular decisions to stave off the prospect of imminent default and for long-term economic stability.
Prime Minister Sharif reportedly held a meeting with representatives from all coalition partners mid-May 2022 wherein a consensus was reached that tough economic decisions will be implemented to steer the country out of the prevailing economic woes and ensure long-term sustainability – decisions at a significant political cost. However, it was further argued that the tough decisions would begin to pay dividends by the middle of next year when elections could be scheduled.
The question is whether this narrative has been abandoned since given the recent decision to prioritise the domestic sector in the provision of gas which is clearly at odds with this claim as economic considerations would have dictated prioritising the productive sectors.
The government’s gas management plan includes shutting down supply to the non-export industry, with an impact on their domestic supply and their price, though the export sectors will continue to be supplied gas; this facility will be in addition to providing electricity to the five export sectors at the subsidised rate of 19.99 rupees per unit at a cost to the taxpayers of around 100 billion rupees which is at odds with the pledge made to the International Monetary Fund (IMF) in the seventh/eighth reviews and which may become a thorn in the success of the ninth review scheduled for next month.
But here comes the crunch: the plan includes a decision to reduce RLNG gas supply to the Power Division by 250mmcfd from November onwards till the end of winter and increase the electricity output through coal by up to 4000MW. Reports indicate that the power sector is now concerned about purchase of the Afghan coal with rupees with the objective of saving scarce foreign exchange as the Taliban, strapped for cash, and fully aware of Pakistan’s energy sector problems, upped the price which in turn has put off importers while competing claims over coal mines have emerged triggering Taliban infighting.
To those who argue that the government would be better advised to purchase RLNG the response is fairly disturbing. Pakistan simply does not have the foreign exchange reserves to buy RLNG in the quantity required to stave off a severe gas shortage this winter that would necessitate the implementation of a gas load management plan.
Problems associated with the power sector are not only varied but also deep rooted that require sustained reforms for a decade or so to deal with; and with the steady erosion of the gas reserves leading to a contraction of available domestic supply the problem is becoming acute. What is extremely disturbing is that there appears to be little effort in undertaking these politically challenging reforms and administration after administration appears to take decisions based on political considerations as opposed to economic considerations, which constitute the main reason behind the appalling state of the economy today.
Copyright Business Recorder, 2022