Energy mix

The energy mix that the government of Pakistan has been following is proving to be an ill-conceived and mismanaged plan with little praise-worthy performance. Major supply constraints have affected business and domestic consumers alike and the government appears to be unable or unwilling to reset its priorities. Its focus on offering energy subsidies of billions of rupees to export industries has not produced any desired results and such handouts have also adversely affected other business and domestic users. Export growth has remained stagnant and even the textile industry which has been serving as the backbone of Pakistan’s economy has given a lackluster performance since 2018. Electricity and gas subsidies need a fundamental rethink as this situation cannot and should not continue for long. If it is not working, we need to do something about it on a priority basis before it becomes too late. In fact, the ministries of energy, finance and planning, should all come together to find solutions to these issues. The misuse of subsidies is affecting nearly all sectors of the economy and curtailing supplies is not helping anyone.

The textile industry has attempted to protect gas supplies and subsidies through courts while gas companies are struggling to manage supplies for other sectors. There are hardly any efficiency tests, and even minor adjustments in subsidised tariffs are drawing the ire of the beneficiaries. For the benefit of just one sector, there is a limit to how much we can squeeze others. Then there is the issue of tax exemptions. Disruptions in gas supply are increasing by the day and the regular citizens of this country are suffering the most. There is a need for some transformative changes in the energy policy involving electricity, gas, and LNG. It is worth mentioning that the government has been providing subsidised gas and power at $6.5 per MMBTU and nine cents per KWh respectively since 2018 and now it has become evident that this policy is unsustainable and has not been able to achieve expected targets. A policy that has not worked in three years is unlikely to produce any worthwhile results in the coming years too.

The bane of the energy sector is also its mounting circular debt due to the cost of annual gas subsidy which is over Rs65 billion and for power nearly Rs20 billion. According to reports, over 1800 export industries are currently getting uninterrupted gas on SNGPL network mostly in Punjab, whereas only 400 factories on the SSGC network mostly in Sindh. As such subsidies have failed to revive the export sector.