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Winter of discontent due to gas shortages

Winter of discontent due to gas shortages

Winter of discontent due to gas shortages

Winter of discontent due to gas shortages

EDITORIAL: This winter will bring a massive energy problem. The weather forecast predicts a cold winter. Successive governments have failed to address this issue, which has continued for years and has gotten worse with the passage of time.

The media debate has mostly focused on the acquisition of imported RLNG and its rates, as well as oil and its products and the energy mix used to generate electricity. The elephant in the room is the country’s dwindling domestic gas production and growing dependency on imported RLNG in the winter. This contributes to the gas cyclical debt.

The debt began with the previous PML-N (Pakistan Muslim League-Nawaz) government and continued to grow under the current PTI (Pakistan Tehreek-e-Insaf) government. The PML-N is now getting a taste of its own medicine. With approximately Rs100 billion predicted growth in the gas circular debt as a result of incorporating imported gas into the domestic sector, the total gas circular debt is estimated to exceed Rs1 trillion.

The country is restrained by the IMF (International Monetary Fund) programme. The Fund is requesting fiscal consolidation through the imposition of new taxes.

The recent visit of Finance Minister Ishaq Dar to Washington produced no results. The call is to ‘do more.’ However, the government’s priority is to resurrect the PML-depleting N’s political capital. In this environment, the PTI’s “long march” may portend further deterioration of the country’s economic situation.

The main issue in the gas business is a refusal to embrace the underlying problem. Every political government wants to offer gas to households at rock-bottom prices via pipeline. In the event of failure, the media and opposition criticise the incumbent government every winter. And sitting governments are frequently forced to make rash judgments as a result of their populist approach to politics.

The solution is to either boost domestic supply or transition away from piped gas. The growing share of imports in Pakistan’s primary energy source lies at the heart of the country’s energy crisis. Imports accounted for 30% of total imports in 2006, and this figure has since risen to nearly 50%.

The increase in imported energy in the mix is associated with the fall in domestic gas share of total primary energy supply, which was 50% in 2005 and is now less than 30%. This is just unsustainable, both fiscally and in terms of externality.

The increasing share of imports in energy supply puts pressure on the current account and renders the external account unsustainable. Supplying expensive imported energy at reduced rates (particularly gas) is increasing energy cycle debt (and subsidies). This problem is silently killing the economy. And the discussion over insuring imported gas, which the country just cannot pay, continues.

As a result, the overall energy policy must be reconsidered. During the previous PML-N administration, a slew of power projects (IPPs) based primarily on imported fuels were launched. The pressure is mounting as these come online. Back then, the consideration was political. There were numerous rash decisions, such as letting power facilities in Punjab run on imported coal. A greater number of RLNG-powered power plants were built.

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