Changes to gas priority order sought

ECC members argue industry should be given priority as it earns revenue for country

ISLAMABAD:

Pakistan’s economic policymakers have suggested amendments to the gas supply priority order with the objective of according top priority to the industry, which will help boost industrialisation process in the country.

In a recent meeting of the Economic Coordination Committee (ECC), its members argued that the merit order for gas supply had been distorted as the domestic sector (residential consumers) got first priority with no value addition. They underscored the need for amending the economic merit order by placing the industry at the top as it was making value addition and fetching revenue for the country.

It was pointed out that the government had already decided the gas load management plan wherein provision of gas to domestic consumers would be ensured for eight hours a day during winter months.

However, some policymakers emphasised that it would not be prudent to further reduce gas supply to residential consumers by relegating them in the priority order.

Domestic consumers are given preference in gas supply owing to the implementation of parliamentarians’ schemes that are mainly undertaken on political considerations to win over voters.

Such schemes are approved by each government to provide gas to villages, though the production of indigenous gas has not increased since the year 2000.

Earlier, the parliamentarians had been banking on electricity supply projects but its network has now expanded to the maximum level.

Pakistan’s gas production is depleting 9% every year and the country has become dependent on imported gas for the past many years. With the execution of lawmakers’ projects, the gas pipeline network is expanding while on the other hand prices are also going up.

Gas prices are linked with a guaranteed rate of return on assets. Therefore, the initiation of new schemes promises more incentives to the public gas utilities on account of increase in prices.

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At present, the domestic sector is on top in the priority order, followed by power producers, the general industry, fertiliser sector, captive plants, cement firms and compressed natural gas (CNG) filling stations.

“There are 72% retail consumers of gas whereas 28% are bulk consumers like the power sector, industry, captive plants and CNG stations,” an official revealed.

In 2005, bulk consumers accounted for 70% of the total whereas domestic consumers comprised 30%. However, the ratio has reversed with domestic consumers rising and bulk consumers dropping drastically.

Industry people argue that this is the reason why the country has failed to give a boost to the industrial sector and industrial revolution has remained a pipedream.

The reversal in priority order has also led to increase in gas losses and theft. In 2013, average losses of gas utilities stood at 10%, which has now gone up to an average of 12%. In the case of Sui Northern Gas Pipelines Limited (SNGPL) network, Karak area of Khyber-Pakhtunkhwa province has a big share in losses where gas theft is high and consumers have no gas meters.

Similarly, in the jurisdiction of Sui Southern Gas Company (SSGC), Balochistan has contributed 40% to the overall gas losses.

According to some officials, alleged mismanagement in the priority order has made the country a net importer of liquefied natural gas (LNG), which added significantly to circular debt. Earlier, the power sector was a key contributor to the debt pile.

Some previous governments had provided LNG to the domestic sector to overcome gas crisis in the winter season. However, it resulted in the accumulation of circular debt.

Of the total debt, Pakistan State Oil (PSO) has to receive Rs470 billion from a gas utility on account of LNG supply. But the gas firm has been unable to recover its dues from domestic consumers.

Published in The Express Tribune, December 3^rd, 2023.

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