FROM a policy perspective, the gas pricing ‘reform’ approved earlier this week by the interim government to recover Rs345bn from consumers is a step in the right direction. It will improve the chances of a successful conclusion of the first performance review of the $3bn Stand-by Arrangement next month, as the gas price hike is a key goal of the short-term IMF loan signed in July. Moreover, it is expected to slow down growth in the gas sector’s ‘circular debt’, which is reported to have reached over Rs2.1tr; save the two gas utilities from bankruptcy; discourage the inefficient use of the fuel; and, more importantly, act as an incentive for exploration companies. However, from the public’s perspective, the increase in prices, by up to 193pc for different categories of consumers, will fuel more inflation at a time when most people are already struggling to cope with the rising cost of living. The fact that rich textile owners have once again succeeded in securing hugely discounted, subsidised gas for their inefficient and wasteful captive power plants has only added insult to injury. This is in spite of a 2021 decision to cut off gas supply to captive power, and divert the fuel towards more efficient generators. That the cabinet turned down a planning ministry proposal to abolish subsidies altogether for wealthy industrialists shows the influence of their representatives in the caretaker cabinet even on crucial long-term policymaking that is the prerogative of an elected administration.

But the affordability of gas is not the only worry for residential consumers. The looming gas shortage, leading to supply cuts and rationing during winter, will be another major headache for households. The government has so far not been able to finalise any contract for additional LNG supplies for the next few months when demand peaks, and it will be dependent on long-term contracts for meeting shortages. As the energy minister told a gathering of businesspeople some weeks ago, gas shortages won’t go away even if the government arranged cargoes to continuously operate the two RLNG terminals at full capacity. What he did not say was that additional cargoes, if secured at the right time, could at least mitigate the shortages. If Pakistan is to overcome the issues of gas supply and affordability, it will have to focus on new domestic discoveries to reduce dependence on expensive imports.

Published in Dawn, October 26th, 2023