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Natural gas crisis major impediment in achieving food sufficiency

Food insecurity

Pakistan has one of the world’s most impressive agricultural systems but it has not used it well or not being able to manage properly. Agriculture sector is still the dominant sector of the economy with profound impact on rural economy. Its forward and backward linkages particularly with the industrial sector, gives it central place as a useful tool for the economic development of Pakistan. In face of increasing population growth especially in developing countries, limited possibilities of further extension of cultivated land, increasing resource degradation and wide gap between potential and national average yield, productivity growth takes an important place to face the challenges of the future to combat against food insecurity.

Pakistan has made significant progress in food production over the last several decades. However, food security is still a key challenge due to high population growth, rapid urbanization, low purchasing power, high price fluctuations, erratic food production, and inefficient food distribution systems. According to the Food Security Assessment Survey (FSA), 2016, 18 percent of the population in Pakistan is undernourished. Food insecurity in Pakistan is primarily attributable to the limited economic access of the poorest and most vulnerable to food.

Pakistan is a highly diversified country, having 12 agro-ecological zones, where more than 35 types of crop and livestock mixed farming systems are practiced. Policies of the successive governments to achieve self-sufficiency in food grains (wheat and rice) and sugar have been implemented successfully. As a result, surpluses in wheat, rice and sugar are produced in the country since the last six years. The high cost of production, the large international stock build-ups and reduced international prices make it almost impossible for Pakistani farmers to compete in the international markets. The FAO ‘Food Outlook’ report further indicates that prices in the international markets will remain depressed during coming years. With the foregoing in view, Pakistan should take measures to introduce changes in its production systems. For instance, area under rice and sugarcane crops will have to be reduced for the cultivation of other high value crops, such as oilseed, pulses, soybean, horticulture crops and fodder.

Natural gas crisis

Pakistan’s primary energy supply mix clearly shows natural gas as playing major role in country’s economic development by accounting for nearly 50% of its total primary energy supply mix. Pakistan’s natural gas production has remained stagnant at nearly 4,000 mmcfd during the last decade. Over last few decades, Pakistan has developed a formidable gas sector. Its economy has so far survived due to abundant initial gas discoveries. The natural gas market of Pakistan is among the biggest in Asia and is somewhat comparable with the size to France and Netherlands. Pakistan was gas sufficient till 2005, however, after that gas production didn’t keep up with the gas demand. The constrained demand of natural gas is 6,000 mmcfd whereas the unconstrained demand is 8,000 mmcfd (8 BCFD) or even potentially higher than this during winters when the domestic gas demand surges exponentially.

 

The peculiar energy mix of the country created space for oil as a major fuel source for power generation which resulted in piling up of circular debt. The gas dependent sectors are suffering with the number of power plants shut down on account of uneconomical fuel use (HSD), rationing of gas. This resulted in enhanced imports of urea. The largest use of natural gas is in power sector followed by domestic, fertilizer, industrial and transport sectors. Major gas reserves including Sui Field of Balochistan, Qadirpur and Zamzama gas fields of Sindh are depleting rapidly, the supply-demand gap in the country is broadening and the country needs alternative sources of fuel to ensure the smooth functioning of local industries. Pakistan is an agricultural economy and fertilizer sector plays an essential role in enhancing agricultural output to meet local requirements as well as exports but as a result of serious gas shortage the fertilizer industry suffered a lot but now with the arrival of LNG the situation is improving. LNG import is a major milestone for Pakistan’s gas sector. LNG development will serve as an impetus for growth not only in gas sector but also in gas consuming sectors including fertilizer and power sector.

With the arrival of LNG and RLNG, the dynamics of the oil and gas sector have changed and a new paradigm shift in gas infrastructure and pricing regime is imperative. In view of the depleting local gas reserves and increasing imported gas in the system, it is of immense national importance to restructure the gas sector with an overall aim of making the sector efficient, dynamic and vibrant in keeping with best international industry practices. For this purpose, a future strategy should be carved out through a highly participatory consultative process by taking all stakeholders on board.

Despite increasing local production and imports of oil and LNG, Pakistan does not have a sufficient supply of energy to meets its demand. The shortfall currently runs at about 2 Billion Cubic Feet per day. Pakistan imports 65 percent of its need. Industry sources believe this deficit will remain for the next 5-10 years. Oil and gas, both locally produced and imported, make up 75 percent of Pakistan’s energy mix. Maintaining and expanding this sector is strategically important for Pakistan’s economic growth.

Feeding an ever-growing population in the country means harnessing the food and agriculture system more effectively towards sustainable agriculture development imperatives. Agricultural development cannot be called sustainable unless it improves Food Security and Nutrition (FSN). Agriculture and agricultural systems of Pakistan are continuously evolving and adjusting to meet the increasing demand for food and changes in nutrition and diet habits. Pakistan’s agriculture has a potential to grow at the rate of 7 percent, provided that a comprehensive program for the development of all the sub-sectors is implemented.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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