A good suggestion

Energy policy must once again take centre stage, & the premier must move forward with the tough but necessary actions

The government’s decision to make imported liquefied natural gas (LNG) the primary source of fuel for compressed natural gas (CNG) stations in the country is one of the few sound measures in energy policy that seems to be going ahead as planned. Imported LNG, while it may end up being slightly cheaper than oil, is still going to be an expensive fuel. Given the diminishing domestic gas reserves, it makes sense to ration the remaining gas to industries that produce the most direct economic benefits, such as the power sector. CNG, currently available at artificially cheap rates, amounts to a massive subsidy to Pakistan’s upper middle class and is among the more wasteful aspects of the current energy policy.

Having said that, while we welcome this current decision of the government, we do believe that a far better mechanism for dealing with gas shortages in the country is to allow for market pricing rather than keeping prices artificially low. Rather than having to ration out gas on the basis of which lobby is best able to get its voice heard in Islamabad, the government would be better off simply by letting prices rise to a market equilibrium and then letting people make their own gas consumption decisions on the basis of the market clearing price.

We understand that the government is currently distracted by the drama playing out in Islamabad, but we do believe that the obligation to govern does not end just because there are distractions. The government of Pakistan consists of more than 1.4 million employees and the machinery of the state should not grind to a halt just because a caravan of political activists have parked themselves in front of the Pakistan Secretariat over the last few weeks.

Energy policy must once again take centre stage, and the prime minister must move forward with the tough but necessary actions that need to be taken with regard to realigning the government’s role in the energy markets. That starts with removing the government’s unnecessary subsidies to those who least need them. Removing the subsidy from CNG users would be a good start, but much more is needed.

Published in The Express Tribune, September 18^th, 2014.

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