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March 13, 2018

Gas reforms

Editorial

March 13, 2018

Last September, Prime Minister Shahid Khaqan Abbasi tried to introduce an ill-advised set of reforms in the oil and gas sectors at the urging of the World Bank. Among the proposals pushed by the government was the formation of a Pakistan Petroleum Exploration and Production Authority which would be supervised by the Council of Common Interests but all of whose members would be chosen by the federal government. The second proposal would have scrapped Sui Northern Gas and Sui Southern Gas and replaced them with five new public-sector companies. This would have segregated distribution and transmission but would also have had the effect of taking power away from the provinces, which understandably want to retain control of both distribution and transmission. Now, six months in, the provinces are stymieing the government’s attempts at centralisation of the gas sector. This should not come as any surprise since both Balochistan and Sindh have been calling for the devolution of the gas sector for some time, arguing that the only responsibility the federal government should have is for pricing. The government has been additionally hampered by the deadline for the project to dismantle and replace Sui Southern and Sui Northern. It insists the work must be completed by the end of the year and that any foreign consultants hired must be present in the country for the duration of the project. Along with the opposition of the provinces, bureaucratic dogma and rigidity may be sufficient to kill a project that was ill-advised to begin with.

To the extent that we need gas reforms in the country, they should be geared towards ensuring that the provinces receive a fair share of the revenues from their natural resources. In Sindh, the provincial government has found it so difficult to convince Sui Southern to provide gas for new power plants that Chief Minister Murad Ali Khan went so far as to threaten storm the offices of the company. In Balochistan, there is understandable wariness at the further federalisation of the gas sector given the decades of exploitation it has suffered at the hands of the centre. Other World Bank proposals accepted by the federal government, such as using domestic gas for domestic consumers and more expensive imported gas for commercial users, should still be pursued but any consolidation of power by the centre at the expense of the provinces now needs to cease.

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