Life, liberty, pursuit of happiness (and cheap CNG)
Fifty years after the discovery of then-one-of-the-largest-natural-gas-fields, the people of Pakistan wait in endless lines and go from one station to another for re-fuelling their CNG tanks or switch on and switch off their stoves in anticipation of a flicker. The energy which was supposed to illuminate has become the source of a dark tug of war between different stakeholders.
Discovery of natural resources can have a very beneficial effect on society (Norway) or may result in civil war (Angola). Our outcome will depend on efficient management of these resources.
In our case, availability of natural gas has tremendously benefited a sizeable section of society including the ruling elite, the farmers and the urban middle class. Fertiliser companies, with capital F, controlled by who-must-not-be-named have access to natural gas at one-third of the price and resultantly enriched generations upon generations through fat profits.
Farmers and their masters have had access to slightly-cheaper fertilisers which revolutionised our agricultural landscape and have lifted millions from poverty. And lastly, the urban middle class has access to almost-nowhere-in-the-world door to door natural gas network for domestic use and cheaper-than-Saudi fuel prices (for CNG) to enjoy dinners in highway restaurants almost half-way to Hyderabad.
All and sundry have enjoyed these benefits in the recent past.
The sole party at the losing end of the bargain was and is the State of Pakistan. The state, which technically owned these resources, lost control over them miserably as these stake-holders and their vested interests claimed their share in the ownership of the finite resources. And before long, the reserves which were supposed to last a century are dwindling in less than half the time amid constant bickering between these stake-holders over who will control the remainder.
There is no harm in providing targeted incentives for a limited time to encourage investment and common usage. But in our case, these incentives for natural gas usage have been provided by the government without an expiry date; and therein lies the problem.
When the population is accustomed to cheap energy, there is propensity to misuse it.
The Constitution of Pakistan guarantees its citizens some fundamental rights (articles 8-28). These includes, life, liberty, security, freedom of expression (and recently added) free education among other things.
Access to cheap energy is not one of them.
Yet all the stakeholders responsible for the energy crisis firmly believe that they should get to continue to enjoy their privileges which are neither sustainable nor beneficial for anyone. It is time to put ‘valuable’ back in energy.
To help solve the energy crisis, it is time for the government to embark on a policy to commit to removing all price discrepancies for domestically-produced natural gas in a phased manner over three to five years’ time and to use international market prices as reference.
This essentially means ensuring that there is no economic incentive to use CNG over petrol for commuters, no humming sound of gas generators in homes, no cheap fertilisers for farmers and no fat profits for fertiliser companies.
Let the market forces decide the price of natural gas.
In all instances, (including recently on sugar prices in The Express Tribune) when market forces are allowed to act freely, price for consumers actually decrease in the long term. The government will need to ensure that there is strong regulatory mechanism to avoid collusion. This will go a long way to guarantee the availability of gas to everyone at a price which reflects its value and avoids misuse.
The difference between the cost of production and market price of gas will accrue to the state (instead of the stakeholders) which should be invested in a long-term sovereign-wealth fund. The fund could be managed by internal or external competent managers and only annual returns of the fund should be used as income. The fund over time, due to sheer size, will also bring stability to other wayward economic indicators.
This endowment model not only ensures that everyone (including the future generations) benefit from the bounties of our promised land but also warrants the state is strong enough to guarantee life, liberty and pursuit of happiness to all (not cheap CNG).
Read more by Durraiz here, or follow him on Twitter @durraiz
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