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Gas crisis in Karachi: most glaring example of incompetency

The recent gas crisis in Karachi, provincial capital of Sindh is the most glaring example of incompetency of the incumbent government. The city faced indefinite closure of CNG stations and suspension of gas supply to captive power plants maintained by the industries. Though, in power for more than 100 days, the economic team of Prime Minister, Imran Khan seems to have no plan to manage the key sectors of Pakistan, particularly the energy chain. There is a constant effort to find escape goats, rather than capacity building to identify emerging problems and take immediate remedial steps.

It was announced that since Sui Southern Gas Company (SSGC) was suffering from a shortfall of more than 200mmcfd, it had no option but to suspend supply of gas to CNG stations. This sounds the most absurd rationalization by the company, which is responsible for distribution of gas in Sindh and parts of Balochistan. Ensuring adequate and uninterrupted supply of gas to SSGC is the responsibility of Ministry of Petroleum. However, SSGC has been made an escape goat, but little effort was made to ensure adequate supply of gas to Karachi, capital of Sindh province that produces 75 percent of total gas produced in the country. Even the provincial government expressed its helplessness, rather than handling the issue on war footings. Not only the commuters endured the worst miseries, but industries located in the city also faced disruption in production activities.

Examining the details indicates that SSGC was already suffering from a shortfall of 150mmcfd and reduction in supply of another 50mmcfd from two gas field proved too fatal. In the past it was easy to take refuge behind non-availability of gas, but now it is totally unacceptable excuse.

The country has infrastructure in place to distribute imported LNG to overcome the shortfall. The decision makers may say that the country does not have foreign exchange to import LNG, which is also not acceptable because industries need uninterrupted supply of gas. The quantity of gas supplied through CNG stations located in Karachi is also minuscule. The situation forces the industrialists and residents of Karachi to infer that the city comes low on priority of the decision makers sitting in Islamabad and also that the residents of the province that contribute more than 70 percent to the total gas production in the country are being exploited in the wort possible manner.

The decision makers also lack the ability to make timely and correct decision. At present the storage tanks of refineries are full with furnace oil that could have been used for operating power plants. It was a question of ‘selecting the lesser evil’. It may be true that furnace oil is less efficient and its use increases cost of electricity generated. However, more than 20 percent decline in international prices of crude oil was an incentive to switch over to consumption of furnace oil for power generation. It has been highlighted repeatedly that use of gas in power generation must be discouraged because it is like burning dollars.

 

It is also important to highlight that financial woes of SSGC are due to circular debt and massive pilferage of gas going on with the connivance of employees of the gas distribution company. The largest percentage of receivables pertain to K-Electric. The issue has not been resolved due to the habit of sweeping the issue under the carpet. It may be true that K-Electric also carry a huge load of receivables, mainly due to non-payment of bills by the public sector entities and federal and provincial government offices/institutions. It is on record that if an individual consumer does not pay his/her electricity bills for more than two month supply is disconnected, but government offices and autonomous corporation continue to get electricity even if their payables runs into millions and billions.

Soon coming into power, PTI government has increased gas tariff exorbitantly. The logic put forward was that gas distribution companies were inching towards bankruptcy. The logic was also termed absurd because it is not justified to penalize the consumers for the massive pilferage, corruption and embezzlements by the top hierarchy of gas distribution companies. If PTI government has initiated investigations against politicians, it should also take action against corrupt officials of Sui twins and OGRA.

The reason for the creation of regulatory authorities like OGRA and NEPRA was to protect the interest of consumers. However, these entities have proved to be ‘rubber stamp’ for endorsing the misdeeds of energy companies and support the government in raising the tariff. The logic behind increasing gas tariff because Sui twins are suffering from huge un-account-for gas is totally absurd. According to some sector experts the huge UAF is not because of leakages but blatant theft of gas. OGRA instead of making it binding for Sui twins to contain UAF has been allowing hike in gas tariff.

To conclude, it is necessary to say that 1) uninterrupted supply of gas to CNG stations bust be ensured throughout the country and 2) power plants must be run on furnace oil instead of gas. Sui twins should also be asked to contain UAF percentage, which mostly comprises of theft.

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