Just when there were hopes that economic decisions for a change may take over political motives, delays in the announcement of gas price revision is suggesting otherwise. The gas price rationalisation proposal is pending for the cabinets approval, and with every day that passes by, the fears that the objectives will not be achieved, are growing stronger.
There is no denying that raising utility prices has political repercussions and the governments track record in this regard is nothing to boast about. That the Petroleum Minister met with the CNG association members and agreed (read succumbed) to their demands of keeping the CNG prices at 60 percent of petrol instead of the earlier planned 65 percent, gives a peak into what lies ahead.
CNG consumption, which is 8 percent of the total gas consumption in Pakistan as per Pakistan Energy Yearbook 2010 (and may have increased further during FY11), has long been criticised, and rightly so, by energy experts. Power sector woes are public knowledge now, and gas shortage is one among its many reasons. Closure of CNG industry at once may be too harsh a step, but discouraging consumption by rationalising prices and levelling it with the substitute is the way to go.
Pakistan will shortly be in dire need to import natural gas and that will be a tricky task as the landed cost of gas is way higher than the price at home. Energy expert believe that gas should be priced at least 60-65 percent of crude oil if Pakistan is to import natural gas to meet its increasing requirements in the near future.
Not only will increasing the gas price discourage the abuse of gas in the transport and domestic sector, but will also boost investment in exploration business, as the current prices are deemed too low to be attractive for drilling at a wide scale.
More importantly, price rationalisation should be done in terms of calorific values equivalent to the thermal units. For instance, even the proposed 40 or 45 percent differential to petrol prices will not serve the purpose, as the calorific value of CNG will still be much more than petrol. To discourage CNG consumption, the differential needs to be closed down massively, this may even mean CNG becoming costlier than petrol.
There is also a need to discourage domestic consumption in addition to price rationalisation. Use of geysers in summer should be slammed with additional surcharge to rationalise domestic gas usage.
The practise of cross subsidy should come to an end as fertiliser manufacturers are openly in favour of feedstock subsidy to be removed. Eliminating feedstock subsidy at once might be a daunting task, but it should be done, nonetheless, in a phased manner.
Gone is the time for doing things gradually, as now is the best time that the current government has, to take un-populist economic measures when the more vocal coalition partners are no more a part of the set-up. The sooner it is done, the better it is, as further delays would push the country closer to elections when politics will take complete hold over economic rationale.