Opportunities often arise from challenges, and Pakistan surely faces enough on almost every other front. Energy is one sector that has been in dire straits for long and requires tough policy-level decisions to be resurrected.
The Planning Commission, it seems has finally realised the gravity of the issue as there are reports emerging that it has proposed gas prices to be rationalised gradually.
Lack of uniform pricing and massive subsides in the gas sector have tested Pakistans fiscal endurance lately. The recent proposal to impose 15 percent fuel equalisation surcharge on gas prices every quarter for FY12 is indeed a breath of fresh air in these testing times of massive energy crisis.
Although, it would be an exaggeration to pin point CNG as the core reason for the ongoing electricity shortage in Pakistan, it still has an important role to play. The liberal use of natural gas by the transport sector heightened the sectors consumption from 2 percent in FY05 to nearly 8 percent in FY10. The transporters gain was the power sectors loss - consumption share of the latter fell drastically from 43.5 percent in FY05 to a paltry 28.7 percent in FY10.
This is not to say discouraging gas usage by the transport sector would completely eradicate load shedding. But it would do two things - one, gas usage can be diverted for industrial consumption which generates much more benefit than solely burning it on the roads. Secondly, it would divert gas - a much cheaper fuel in comparison to furnace oil - to power plants, helping generate more electricity and at a slightly lower tariff.
To put things in perspective, assuming the gas used as CNG is completely diverted to the power sector, Pakistan can generate 2000 MW from gas at much cheaper rates than furnace oil, which would be a welcome addition in such tough times. Those who argue that it will rob people off a cheaper fuel should bear in mind that CNG consumption in Pakistan defies the very purpose of subsidy as it largely benefits the upper middle class and the likes.
Domestic consumption is also an area which needs immediate attention, as the low pricing encourages high demand and creates problems for industries, especially in winters. A gradual increase in domestic slabs should also be adopted so that it encourages conservation and efficient use of gas.
The time is also ripe to do away with subsidies for the fertiliser sector, which distort the pricing and often irks other industries. Fertiliser manufactures have long been pitching the same. So now is the time to take that step as the farmers community has enough muscle to deal with an increased input price.
All said, it won be an easy road to travel as the government will have to face pressures form a number of lobbies. But if it is to move in the right direction, it should show the strength and the will to take the bold step which is, for a change, in the right direction.
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Petrol CNG CNG/petrol
(Rs/ltr) (Rs/kg)* differntial
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1HFY09 77.16 30.33 -61%
2HFY09 57.42 33.37 -42%
1HFY10 62.85 33.37 -47%
2HFY10 70.69 39.34 -44%
FY11** 73.67 39.34 -47%
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Source: Pakistan Enegrgy Yearbook, Ogra
* CNG prices in eqvivalence to petrol
** figures for Jul-May