Weekly review of the developments & decisions that are helping shape the economic horizon
By Enem Ali Abbas
The year 2019 shall witness the conclusion of textile policy crafted for the period between 2014 and 2019. The policy was brainstormed during the tenure of PML-N and 80% of its whole was exhausted during the tenure of the same government. PTI has its remaining twenty percent, i.e. 1 year. The policy failed its implementation, the government had aimed at creating 3 million jobs and boosting exports from 13 to 26 billion US dollars. Apart from fiscal year 2017-18, that recorded 9 percent growth, we didn’t encounter any considerable surge rather declines were reported. As June is approaching, PTI is planning to come up with an alternate policy for textiles. However, if you study the textile policy of PTI that they come up with during election – this 18 slides document is nothing more than a planning book of grad student aiming to compile a presentation to pass through the exams without getting flunked. It is ambitious but it definitely lacks the direction, what is positive about it– they wanted to cut down the gas cost for zero rated industries in Punjab and make it even, they DID it.
What disturbs us the most is, those who knew the technicalities of textile industry failed to implement the policy and now we have pinned hope on those who are new to the business. Either ways, it’s a roller coaster ride for the Pakistanis.
Mari Petroleum’s refusal & urea manufacturers
On the other hand, Mari Petroleum’s reluctance to hand over additional 66 MMCFD to fertilizer sector is a point of concern for the government. Earlier ECC had made its decision to support local urea manufacturing, it also announced to subsidize the rates of gas to urea plants which were earlier shut down as the incentive promised by the government was not fulfilled but later the major plants including Agritech and FF started their operations when government gave a go ahead for reduced tariff by following the requisite protocols. The decision faced its ups and downs and urea manufacturers also threatened to shut down the plants if government doesn’t keep its promise. ECC, which earlier had committed it and didn’t take on board SNGPL, then facilitated the resolution and it was then decided that SNGPL shall bill the subsidy to finance ministry and then adjust the amount in subsequent bills to these zero-rated industries. It is a point of concern here that if we do not manage supply to urea manufacturers then we shall have no option but to import it. It is pertinent to mention here that, during the year 2013, we imported 775,390 tonnes of urea which was 45% lesser than the previous year and Pakistan imported only 39,899 tonnes of urea in 2016. Surprisingly, during Ishaq Dar’s tenure, we had excess of urea inventory that government had allowed 300,000 tonnes of urea export. Contrary to this, in 2018, we were not only short of our due demand but government also planned 100,000 tonnes of urea import and then another import was likely. The government which is currently led by PTI, has always been advocating exports and discouraging imports – this is totally opposite to what happened in 2018. Government must take all relevant departments in loop before committing any incentives for any industry, because earlier inability of the government to dissolve boards of gas companies had earned a lot of embarrassment already. In the current 66 MMCFD quota issue, the said amount of gas has yet to be drilled, it would be available after 2021 and as per the government’s rules and policy, MPCL is allowed to use the deep gas for setting up 180 combined cycle power plant and as per the law MPCL has its first right on it. This issue shall not only leave promises unfulfilled but also urea demands unmet and imports surged and exports discouraged.
CPEC & Energy Projects
It is pertinent to mention here that a megaproject on energy generation was also shelved by the government. Rahim Yar Khan Coal Power Plant would have an installed capacity of producing 1320 Megawatts of electricity, if given a go ahead. The said project was part of the CPEC and shelving something of this scale would definitely irk China. We were told about the energy crisis by our current government time and time again, as government when took the charge of their constitutional term was of the view that if PML-N government had generated enough energy then where does it go and why there is loadshedding. Now the same government is trying to plead the case with an argument that Pakistan already has the capacity of generating energy more than it actually requires. Setting up further plans shall place Pakistan in capacity trap. It is yet to be discussed formally with he Chinese officials but at least we the public stay clueless on the following questions… Do we have ample generation capacity? If yes, did PMLN enhance it and why were we earlier lied to? if No, then why is the government shelving such an important project?
Then again, why the Minister for Power told in the apex court that we shall be needing 55,000 megawatts of energy by the year 2050. This raises another question, the IPPs which have 34,000 megawatts of generation capacity, we buy them furnace oil to buy energy from them, if we don’t buy them furnace oil, we still pay them capacity charges. If we buy them furnace oil, it produces expensive electricity. Then, why the gas power plants of PMLN’s led government, (which as touted by the PTI are producing expensive electricity) are running at half capacity despite the fact that gas is at least cheaper than furnace oil, as touted by the opposition leader Shehbaz Sharif. Is government willingly paying more on furnace to avoid using PML-N setup plants or furnace oil is actually cheaper than gas power plants? Government must answer this before any incompetence or loophole brings this economy at the verge of collapse once again. Energy shutdowns have already disturbed agriculture sector, urea production, textile and further energy mismanagement shall start costing local small-scale vendors their daily bread. Probably what Opposition Leader pointed out in the national assembly was well heard by ECC, it is a disturbing fact that Pakistan generated electricity through residual fuel oil which led to the breakdown that country experienced in January. Instead of generating electricity from gas/RLNG, government resorted to furnace oil which has an estimated extra cost of Rs. 10 billion. Luckily government has realized that this although goes as planned during meetings held in November and December last year but the unaddressed or unseen cost probably just popped up and government is left with no option but to shift back to RLNG. For supply of gas, after domestic consumers the top most priority is energy sector. During earlier ECC meetings, the quota was transferred to low-priority areas causing such a shortfall that landed this government in hot waters. Although the difference of cost that has been generated shall be passed on to the consumers in the name of fuel price adjustment, so government needs not to worry. By diverting gas to other sectors, it doesn’t mean that government didn’t import urea. It definitely did. Apparently, the experiment looks like a failure.
