Pakistans energy and gas crisis due to poor governance

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Gas-Load-shedding-480x_optDEVELOPING NATIONS do con¬front energy crisis due to high demand on the back of rapid industrialization, growing commercial activities and domestic consumption, hiked by the expanding middle class, which demands a better life. Often, the energy demands out paces its supply in economies, which strive for rapid industrial and economic growth. China understood this in the very beginning that it needs sufficient energy supply to become a global business leader, the Chinese immediately went for Gorges Hydro-Power plants, the worlds largest hydro facility. Today Chinas energy growth matches its GDP growth. In fact, China is also the global suppliers and contactors in the field of power, oil and gas plants and other facilities.

India, our next door neighbor, is an¬other example. We are always excited to compare Pakistan with India, the energy sector, comparison appears relevant as once Pakistan was well ahead of India in energy self-sufficiency. But India is catch¬ing up very fast. Indians also understood that for achieving a competitive and leading position in the global world, it is extreme important to be strong in economically and politically, which the backbone is “self-suffi¬ciency in energy.” Their GDP growth is 7 percent for the last many years and has resulted in rapid energy demand which apt beats the energy availability, hence the energy shortage and crisis. But there are no significant riots because the public sees gradual progress happening and have a hope that soon the crisis will be over.

Under a win-win public and private partnership, India is implementing a well defined plan and strategy to meet the energy demand systematically. The gov¬ernment understands that the time is run¬ning out energy demand has to be met on a fast track basis and it realizes that alone this cannot be done. Therefore, the Indian government motivated business giants like Tata, Reliance Group and others to invest and manage the energy sector.

Then what went wrong, in Pakistan? We were once far ahead of India in our infrastructure and the foreign investors praised it. Even in as late as 2006, negotiating with India to sell Surplus power driven out of the successful induc¬tion of independent power producers and some public sector hydel projects. PSO, OGDCL, SSGC, SNGPL and other firms were rated as blue chip global companies and as role models. In the subsequent years, Pakistan nosed dived to its lowest, purely on ac¬count of incompetence driven by lack of vision, strategy and above all poor gover¬nance on account of political influence and considerations. This is the main fac¬tor that destroyed our energy sector and standing as a developing nation. Today, Pakistan has no significant new foreign direct investment in the energy sector, while the performance of its public sector remains pathetic.

Recently, the Consumer Rights Commission of Pakistan has conducted the policy dialogues in all the provincial capitals and in Islamabad on the “Role of Government and Regulators in the Gas Sector” with Parliamentarians, Civil Society Organization, Academia and Media. The aim of these dialogues was to inform the stakeholders about the state of gas governance in Pakistan and generate a meaningful debate for ameliorating the identified areas of concern. During the discussion it reveals that, the major problem in gas crisis is the rise in un-accounted for gas (UFG), which means difference between total volume of gas purchased by the companies and volume of metered gas supplied to consumers. UFG levels of Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) have remained abnormally high of over 10 per cent last fiscal year. International bench mark of UFG for companies is not more than two per cent. According to OGRA estimates one per cent of UFG of both companies at average price of fiscal year 2011-12 translated to a revenue loss of Rs3.0 billion per year. The OGRA annual report says that in fiscal year 2011-12 the UFG was Rs 32 billion. Massive monetary losses in the form of high UFG losses are recovered by utilities by passing on the impact to consumers. Effective enforcement of UFG benchmarks could result in savings for consumers.

A good 75 per cent of Pakistans energy crisis is attributed to poor governance. If good governance is provided on a sustain¬able basis, the crisis will be diluted to man¬ageable levels in a short period. The dichotomy of the present crisis at one end point to prudent macroeconomics management mechanism and remedial analysis focusing on government policy, expenditures and tariff issues for rectification at the other it needs a review through the critical lens of good governance focusing on accountability and transparency of the natural gas sector that failed on the whole. Transparency and accountability are key to good governance transparency in itself is expected to empower efforts to change the behavior of powerful institutions by holding them accountable. More broadly, the twin principles of transparency and accountability are rudiments for achieving national goals through good governance practices.

The transparency internationals corruption perception index which measures the perceived level of public sector corruption places Pakistan at 139/176 (27/100) for the year 2012. Pakistan scored -1.103601129 in the control of corruption index, one of the six dimensions of the Worldwide Governance Indicators, this reflects perceptions to the extent at which public power is exercised for private gain. This includes both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Negligence of these criterions directly impacts the economic life of the nation and its citizens. As a result the effective system of drafting policies, making financial appropriations, holding hearings with stakeholders and experts, and subsequent decisions get influenced, politicized and staggered. The standing committees get misinformed and the resulting policy directives get maligned. This dysfunctionality also causes a clash with other institutions and policies. This always affects the citizens adversely hence cannot be overlooked under the fundamental rights of the people by Article 184(3). The natural gas crisis creates a serious focus to build the institution of OGRA it requires a team of committed and competent professionals with the full backing and the resources of the state to build a fruitful and sustainable public-private partnership.

The writer is Project Manager in Consumer Rights Commission of Pakistan. <>


Published in: Volume 04 Issue 08

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