‘NFC-style formula could help solve gas shortage’

Industry groups call for de-politicisation of the issue.

LAHORE: The gas shortage in Punjab is primarily a problem of misallocation of resources that could be ameliorated through a consensus similar to the one developed in the National Finance Commission award in 2010, say provincial government officials and industry groups.

In recent months, the energy crisis of the province has become one of the many issues over which the two major political parties in the country – Pakistan Peoples Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) – have been engaging in verbal disagreements.

Under the constitution, the distribution of natural gas in the country is an issue to be decided between the provinces, though article 158 states that the province that has the largest percentage of gas gets priority over its usage. While Balochistan has the single largest well at Sui, the province with the largest proportion of gas reserves is Sindh, which supplies 70 per cent of the country’s gas.

The government has tried to resolve the issue through interprovincial consultation before. In December 2010, Prime Minister Yousaf Raza Gilani, at the request of Punjab Chief Minister Shahbaz Sharif, convened a meeting of Council of Common Interests (CCI) to discuss the matter. It was decided at the meeting that Punjab’s supply of gas would remain suspended for two days every week to manage the load. Both industrial consumers as well as fuel stations that supply compressed natural gas (CNG) would not be supplied for two days a week.

However, Punjab government officials as well as businesses in the province complain that the agreement has not been implemented either in letter or spirit. While CNG stations continue to have only two days of suspended supplies, industries have had to face as much as a five-day suspension of gas every week. This suspension has led to most industrial units functioning at significantly below full capacity, causing layoffs which increase the unemployment rate.

Punjab government officials, who wish to remain anonymous, propose that a formula for gas distribution be used that is similar to the one that addressed government tax revenues. In the NFC award, the federal government and the four provincial governments decided to use multiple factors to decide the division of tax revenues, which included population, revenue collections and generation, inverse population density and poverty rate. The use of multiple factors helped pass a fair distribution that was acceptable to all provinces.

Some officials have suggested the factors that should be used to decide gas consumption should include a province’s contribution in the gross domestic product (GDP), number of dependent industries (all sectors), employment and tax collection from industries working on gas, rate of consumption, number of consumers (domestic and commercial) and volume of production/products.

Provincial government officials in Lahore point out that Punjab contributes 61 per cent of the country’s GDP and, according to the formula they propose, would require a 62 per cent share of the country’s gas production.

According to consumption data as well as demand estimates, Punjab faces a shortfall of at least 30 per cent of total demand. Provincial government officials say that several industrialists have threatened to move out of the province if their gas supply issue is not resolved. This has led Chief Minister Shahbaz Sharif to declare that gas load-shedding was a grave injustice towards the province of Punjab.

An official at the All Pakistan Textile Mills Association (APTMA), the largest textile lobbying organisation in the country, Muhammad Anees, said that production in the province has dropped 25 per cent in textile sector owing to the gas shortage. Millions of workers have become unemployed as a result, he claimed. He added that there was no gas shortage in Sindh and Khyber-Pakhtunkhwa.

Published in The Express Tribune, March 1^st, 2011.