Karachi industries be accorded first priority in gas supply

November 5, 2021: Leading industrialists/ exporters have demanded that first priority in respect of gas supply must be given to industries of Karachi that contribute more than 54 percent to national exports, provide the highest urban employment and generate the highest taxes for the Government, besides being the highest subsidy provider.

Worldwide the Export Sector is given first priority in the economic activities and it was heartening that the Government has upgraded five zero-rated export sectors' industry to second position in the Natural Gas Load Management Policy, however, the zero-rated export sectors' industries should be given the first position and general industries must be placed on the second position in the priority list followed by commercial, domestic and other sectors to increase the production and fulfill the aim of the Government to enhance exports.

The was demanded by Chairman Businessmen Group & Former President KCCI Muhammad Zubair Motiwala, Vice-Chairman Businessmen Group & Former Senior Vice President KCCI Muhammad Jawed Bilwani, President Karachi Chamber of Commerce & Industry Muhammad Idrees, President SITE Association of Industry Abdul Rasheed and Former President SITE Association of Industry Saleem Parekh after a meeting of leading industrialists/ exporters who had deliberations on gas problems.

The Industrialists/ exporters questioned that how can the domestic sector be ranked as first priority to whom the subsidy is being provided by the industrial sector? It was highly unfair that the Government has accorded first priority to the domestic sector in terms of the supply of gas on subsidized tariff through cross-subsidy by charging a high rate of gas to industrial consumers.

They said that the industries, which were ranked below in the priority list of gas supply compiled by the government, remain starved for gas which was the most essential raw material throughout the year, particularly during the winter season. Should not the sitting Government, having a slogan of change, prioritize its decisions of national interest over political interest? The industries in view of their pivotal and pragmatic role in the socio-economic development of Pakistan deserve first priority in respect of the supply of gas, they added.

They articulated that it is an irony and highly unfortunate that industries that provide cross-subsidy for gas to the domestic sector lack priority in respect to gas supply while the domestic consumers have been accorded the first priority on the cost of industries. For the supply of power, no such subsidy is given to the domestic sector. The reason is simple that the calculation of gas pricing is done after accounting for all subsidies to be given to domestic, fertilizer and other sectors. This means that the total subsidy given in this regard to various sectors is not borne by the Government or included in the Budget but is actually taken from the industrial sector during the calculation of gas pricing. Meaning thereby, the industries are actually subsidizing the domestic sector and other sectors including their UFG rather than the Government.

Therefore, the industries should be accorded top and first priority in the list of gas supply to various sectors and it must be changed forthwith, accordingly. It is a global fact that any nation which does not give importance to the industrial sector cannot grow economically. Subsequently, the industrial sector should give top priority in view of its inevitable role in the socio-economic development and prosperity of the country.

They apprised that it is also worth noting that the major portion of subsidy being given by the industrial consumers is enjoyed by domestic consumers who actually can afford the higher domestic tariffs. The population living below the poverty line doesn't use domestic natural gas but bio-fuel or woods or LPG while currently the indigenous natural gas is used in the domestic sector in the Bungalows, Houses, Flats by upper-class Urban Areas. Population living below the poverty line even don't have roofs on their heads. It is proposed that the domestic connections already given in the urban and rural areas should be removed gradually and converted to other sources like LPG in Urban areas and Biogas in Rural Areas.

At this point in time, the industry is suffering the worst ever crisis in history. With the passage of time, slowly and gradually, the gas consumption of domestic consumers has come almost at par with the consumption of industrial consumers. SSGCL and SNGPL expanded their transmission network by thousands of kilometers to provide natural gas to villages that has greatly perturbed the Export Sector which is struggling hard to make both ends meet and is battling for its survival with the severest competition in the global market against neighboring and regional competing countries.

They added that Pakistan may consider the model of gas prices of Bangladesh and be introduced in the country in view of fair treatment for all sectors. The Bangladesh model is that they charge to their domestic consumers as per gas burner while in Pakistan, domestic consumers are charged for gas consumption through gas metering. The UFG in Bangladesh is much lesser than in Pakistan. They urged the Government to take drastic steps to conserve gas and utilize it for productive consumption only. The Government should introduce a fair policy to change the usage of geysers from gas to solar and electricity.

They were of the opinion that politicians, who demand priority to the domestic sector, must understand that the dependence of the economy is on exports and the survival of the people depends on the employment provided and created by the industrial sector. Politicians must also understand that the population growth ratio must be less than that of the growth ratio of industries, otherwise, law and order situation and anarchy will prevail.

They demanded that the Government must give industry total preference and top priority and cross-subsidies should be reduced drastically and done away with. The gas charges for the domestic sector, fertilizer and other sectors should be rationalized. There should be some other mechanism to provide relief and the tariff of the industry be reduced as well so that the industries can compete with regional competitors and it should be made mandatory on gas companies to provide gas in required quantum, pressure and price.

Globally the Governments give priority to Natural Gas Supply to the industries while the Domestic and Commercial Sector is supplied LPG but here it is the other way round and precious Natural Gas is being supplied to the Domestic and Commercial sectors at the cost of industries which badly requires indigenous gas. Moreover, unaccounted for gas (UFG) / Line Losses are approx. 10 percent in the Domestic and Commercial Sectors while it is approx. 1 percent in the Industries Sector. Unfortunately, even UFG of the domestic sector is borne by the industry. According to the determination of OGRA for the year 2020-21, gas worth Rs41 billion gets wasted in the head of UFG and out of Rs41 billion, the impact of Rs25 billion has been passed on by OGRA to the masses/consumers, and only Rs16 billion loss borne by Gas Companies. Number of Consumers (Cumulative) as of June 30, 2020, Domestic are 10,056,784 (10 million), Commercial are 89,214 and Industrial are 11,338.

In Pakistan, the gas field was discovered in 1952 and production of gas started in 1955. From 1955 to 1970 the government’s policy for gas utilization was for industry and power generation. In the 70s, there was a shift in policy and gas was supplied to small towns and villages at a nominal rate and from 1988 onwards, gas supply was irrationally prioritized to the domestic sector. Subsequently, the first priority should be given to the five zero-rated export industries followed by general industries. One can imagine how can exports be enhanced, GDP increased and Trade Deficit reduced when the export-oriented sectors are being treated after the domestic and commercial sectors.

Press Release

Posted on: 2021-11-05T15:23:41+05:00

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