Energy crisis: Time for Sindh to do the right thing

KARACHI:

When it comes to energy, it is time for Sindh to cast off its traditional role as the smaller province and recognise that its dominance over most of Pakistan oil and gas production means that it must play the role of the “responsible elder brother.”

As the country’s leading energy producer, Sindh has it good. It has 56 per cent of the country’s oil production and, contrary to common perception, produces over 71 per cent of Pakistan’s natural gas. This does not even include the fact that the province is home to Thar which is, by most accounts, the second largest reserve of coal in the world, after the United States. It is entirely likely that coal will account for a greater share of Pakistan’s energy production over the next few decades and Sindh has a virtual monopoly on domestic supply.

This overwhelming dominance on hydrocarbon resources – as oil, gas and coal are collectively known – gives Sindh unprecedented leverage over the other  provinces, specifically the one with which Sindh has had the most political disputes over the past few decades: Punjab.

For decades, Sindh has been used to being the deprived province. Along with Khyber-Pakhtunkhwa and Balochistan, Sindh often led the rhetorical charge against Punjab as being the domineering large province in the country that had a habit of taking away taxes collected in Sindh and spend them to build an infrastructure for the Punjabi elite. Sindh had an additional problem with Punjab: it felt that the larger province was not giving its fair share of water from the Indus River.

So the animus between the two provinces runs deep and is understandable. But when it comes to energy, the tables are turned. Sindh has an overwhelming dominance on energy and Punjab is little more than a bit player in everything except electricity generation. Given this fact, and the fact that Punjab made an extraordinary gesture towards fairness by sacrificing some of its own interests in the National Finance Commission (NFC) Award of 2010 – which distributed tax revenues amongst the provinces – Sindh needs to revisit its role and treat Punjab more fairly on energy.

The gas crisis in Punjab

Nowhere is the need for a fairer distribution of energy resources more evident than in the case of natural gas. During the month of December 2010, the latest for which figures are available, Punjab received 1,450 million cubic feet per day (mmcfd) of gas. Demand, however, was estimated at 2,033 mmcfd, meaning that the province faces a shortfall of over 30 per cent.

The province’s gas shortage has resulted in a severe crisis. Industrial users of gas have faced shut-downs for five days a week due to a lack of gas supply, known colloquially as “load-shedding”. Vehicles that run on natural gas cannot get fuel for two days a week.

Domestic consumers often face several hours a day without gas, which can be especially difficult during the winter months when many parts of the province get cold and people rely on gas-fired heaters for warmth. Cooking can be problematic as households have to wait for the gas supply to come on before they can begin preparing their meals. Even when it does come on, there is no guarantee that the pressure will be enough to support a flame. The gas crisis, in other words, literally brings life in Punjab to a grinding halt.

According to article 158 of the constitution, the people and industries of Sindh have the right of first usage on the 71 per cent of the country’s natural gas that comes from the province. But Sindh has less than 25 per cent of the country’s population and only 34 per cent of its large scale manufacturing. There is no logical reason why Punjab should be forced to make do with less gas while Sindh bears almost none of the burden of the overall national gas shortage.

In recent months, Punjab government officials have been proposing a series of solutions to the crisis, not least of which is a gas-sharing formula based on multiple factors, similar to the revenue-sharing formula created under the NFC Award of 2010. During the NFC negotiations, Punjab made historic and extraordinary concessions to the smaller provinces which laid the financial groundwork for allowing greater autonomy to the provinces. Punjab now deserves that the same courtesy be extended towards it when it comes to gas.

Electricity

Power generation is an area where Sindh benefits not from dominance but from the fact that tariffs are set nationwide rather than allowing each region to set its own tariffs. Here is why that matters.

In terms of electricity generation, the country is divided into nine zones, each served by a separate distribution company. Each region has different costs of production, including the amount of theft that power generation companies expect and factor into their overall costs. Specifically, the incidence of theft is far higher, by as much as three times, in Balochistan and Sindh than in Punjab.

Given the fact that prices are set nationally, however, consumers in Punjab must pay extra in order to take into account theft in Balochistan and Sindh. In other words, if each region were allowed to independently set prices, Punjabi consumers would pay lower prices for having fewer neighbours who steal power from the grid. Prices in Sindh and Balochistan, by contrast, would rise. Needless to say, Sindh is opposed to allowing independent pricing.

Independent pricing would have another benefit: give lower rates of theft, it would be easier to attract investors into Punjab’s power generation and distribution companies, expanding production capacity. It may even be possible to get rid of power outages in Punjab entirely over the next few years.

Sindh should play fair

Punjab may not always have treated Sindh and the other smaller provinces fairly in the past but its efforts over the past two years to remedy the institutional biases against them have been admirable to say the least. None of the smaller provinces can expect to prosper by allowing Punjab to flounder. A dynamic Pakistani economy requires a dynamic Punjab.

It is time for Sindh to stop playing the battles of decades past. If it is water that concerns Sindh, then the provincial government should say so. A deal that encompasses an exchange of concessions on water against concessions on gas is not out of the question.

These are not our grandfather’s Punjabi leaders. They have been very reasonable and have shown themselves willing to compromise. It is time for us in Sindh to do the right thing.

Published in The Express Tribune, March 7^th, 2011.