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Hassan Shahzad

COURSE:HISTORY OF POLITICAL ECONOMY OF PUNJAB

FINAL PROJECT SECTION 2

TOPIC:CNGLOAD-SHEDDING

PRESENTED BY:HASSAN SHAHZAD

PRESENTED TO:MAJED AKHTER


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The topic I am writing for the final was CNG load-shedding, a major issue in the country.Let me

give the recap about my topic. In previous section I gave the introduction about my topic. CNG

load-shedding which was started in 2000 onwards because of huge increase in its demand.

Compressed Natural Gas which is a substitute for petrol, diesel and LPG. CNG is made by

compressing natural gas and it is stored and distributed in hard containers usually

incylindrical or spherical shapes. It is one of the natural resource found in

Baluchistan (Natural gas - proved reserves:840.2 billion cu m ) which is limited and

will be available for few more decades as its demand is increasing day by day. The

reason I like this topic and writing about it is because I myself is CNG user and faces

a lot of problems when It is unavailable because of load-shedding. . Sui Northern Gas

(SNG) announced a three-day gas load shedding plan for Punjab. According to the schedule,

there will be three-day a week load shedding for CNG stations.This schedule was implementedin late 2004 after the closure of Zamzama gas field to ensure gas supply for the houses.

Transport industry and many other factories are affected very badly because of this load-

shedding.

Many industries in Pakistan has moved to other countries mainly to Bangladesh to but their

costs, also they dont have too much power shortages leading to higher profits for the

industrialist. Here in Pakistan they were suffering from huge losses. Many factories were shut

down because of load-shedding which led to unemployment which further led to increase in

crime rate as people did not have a way to earn and to provide shelter to their families even

they could not fulfill their basic needs.

As I continue the topic in this section I will discuss about its effects on economy, the question arises

because of this load-shedding and the solution for this problem.

The first question which comes to everyones mind is

How CNG Load-shedding effects?

The unannounced gas load shedding in the country has put the CNG transport in troubled as

well as consumers, industry and other business activities The gas shortage has forced a numberof industrial units to close down while delay in fulfillment of export consignments has become a

matter of routine due to less supply and low pressure of natural gas. Moreover, it has been

reported that in small cities and towns of the country, the commodity continues to disappear

for hours without prior intimation, thus badly affecting the domestic users as well as the public

and private transport running on CNG.

Meanwhile the government has already announced Gas Load Management Plan

under which gas supply to the industries and CNG stations would be halted for three


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days a week but the plan is looking ineffective. Sources told The Nation it was decided

under the Gas Load Management Plan that there would be two-day load-shedding

in a week for the textile industry, however the days have now been enhanced up to

four days a week which is totally unjust with the industries. In the present situationwhen there is six to eight hour power load shedding, gas shortage is hampering the

growth of industries, which would affect the growth of overall exports of the country.

Former President Pakistan Federation of Commerce and Industry told that the

economic condition of the country had suffered a lot due to various crises and the

growth rate was witnessing a downward trend. Many industries of Pakistan has moved to other

countries i.e Bangladesh and India where the can get these facilities easily and at lower costs

so they can have higher profits but, the shifiting has lead to a fall in Pakistans GDP.

Industrialists are scared to invest in the country as they think that they wont be able to survive

in future.

As the prices of CNG has increased by a great percentage but its load-shedding has not stopped

however it had no effect on the load shedding.The students face difficulty in going to theireducational institutes due to the in availability of transport. School and office staff that uses the

public transport, arrives their offices late, and this happens more often. Patients suffering from

fatal diseases die, due the in availability of transport to the hospitals during the days CNG isn't

available. Punjab were the hardest hit industry, there are about 3,500 factorieshave closed as a

result of energy crises. Same is the case with small-scale-businesses and traders, due to CNG

load-shedding, the business of small-scale traders is also affected badly. These traders, mostly

use CNG vehicles to transport goods like vegetables, fruits, dairy products and baked items toshops. therefore, a huge rise in unemployment to be loaded. also in a higher crime, because

people have no chance to win and had to protect their families could not meet their basic

needs.

It is abundantly clear that due to gas load shedding and low pressure, people including

labourers, and daily wagers have faced huge problems and remained jobless because

productions of factories and power loom units had halted. Power looms owners were not

getting the sized yarn beam from textile sizing factories for starting production of cloth, while

huge stocks of cloth were piled up on the premises of the textile processing and printing mills,

where gas is not available.

Power loom units were not using gas directly, but thousand of looms remained closed due to

breaking of the textile chain because of the freezing of textile sizing sector. Consequently, due

to prolonged gas shedding, hundreds of labourers, most of them daily wages, suffered from gas

load shedding which has left them penniless as they are struggling to generate income from

other ways. Almost all manufacturing activities have already been frozen because of

mismanagement and unfriendly course of action of the present regime, while the worst gas


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shortage threw more fuel to the fire. Lately, the labour unions have also expressed grave

concerns over the prevailing situation, which is generating unemployment and poverty in the

province. Almost all the textile manufacturing and export organisations have strongly criticised

the SNGPL for its mismanaged gas supply to the textile industry, causing a colossal loss of overRs50 billion, so far besides affecting direct employment of about 350,000 labourers across the

Punjab.

Such circumstances would definitely increase the ratio of unemployment, which is the main

cause of terrorism and extremism in the region. The government should ensure gas and power

supply to industries on priority basis. Similarly, domestic consumers throughout the country are

also facing problems due to the long hours gas load shedding and thy forced to use woods for

cooking food and for other uses.

According to the sources, the association in the upcoming meeting would make future strategy

for the Gas Load Management Plan and expected hike in CNG prices. The association would

discuss different options with its members. While the government on the other hand is actively

considering this option to increase the prices of CNG by Rs8 per kg from the start of New Year

2011 in order to reduce its demand. The government is also trying to increase the demand of

petrol as after hike in CNG prices, gap between two fuels (petrol and CNG) would minimize and

people would go to use petrol. Sources further told that CNG association had two options

either to call for countrywide strike for indefinite time or to go to Supreme Court to find justice

as presently on side CNG sector is facing two holydays a week and now expectedly increase in

its prices.

WHY CNG PRICE INCREASES RAPIDLY?

Due to increase in high petrol prices people shifted from petrol to CNG which increased its

demand. Due to this increase in demand the prices has increased rapidly as compared to

previous years. The overwhelming hikes are expected to trigger a nervous breakdown and

backbone-breaking inflation in the country that could cause nationwide violent protests,

particularly in the urban areas of the Punjab and Sindh where urban-based political parties such

as the PML-N, PTI and MQM are exceedingly sensitive to increases in the price of POL products,

CNG and power tariffs.

The hike is also expected to raise political temperatures, and the party that fights for the

inflation-stricken masses will definitely maximise its vote bank prior to the next general

elections.

The incumbent regime is also ready to face the music in the upcoming elections because of its

prudence to deal with all economic issues particularly the issue pertaining to the price of

petroleum products, CNG and power tariffs. With the increase, the government is likely to

pocket Rs25 billion in the month of April in the form of heads of GST and petroleum levy, an

FBR official revealed to The News. "On account of GST, the government will earn Rs18 billion

and Rs7 billion because of the petroleum levy," the official, speaking on condition of anonymity,


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said on Saturday. "Compared to the month of March, the government will have an additional

Rs1.5 billion revenue as more GST will be collected because of a hike in POL prices so much

so that the government will earn Rs27 billion gas development surcharges.

The Oil and Gas Regulatory Authority (Ogra) has massively jacked up CNG prices by Rs9.93 andRs11.58 per kg from April 1 by imposing a 20 percent gas development surcharge and

increasing the gas price by 20 percent.

The price of CNG has increased alarmingly by almost 110 percent to Rs88.70 per kg from Rs31

per kg in 2008. Under the notification, Ogra increased CNG prices in Region-I (KP, Potohar and

Balochistan) by Rs11.58 per kg owing to which the new CNG price in Region-I now stands at

Rs88.70 per kg. In Region-II (Sindh and Punjab), the government has increased the price of CNG

by Rs9.93 per kg to Rs80.89 per kg.

Meanwhile, Central Chairman of All Pakistan CNG Association Ghiyas Abdullah Paracha has

strongly rejected the exorbitant increase in CNG prices. In a press release, he said that an All

Pakistan CNG Association CEC meeting has been called to review the situation. He said that this

increase is illogical and unacceptable, adding that it serves to invite a storm of inflation and will

ignite fire in the hearts of the masses: "Countries all around the world are rapidly adopting CNG

fuel while we are going to ruin ourselves," he charged. "CNG consumers have already been

disturbed by unjust three-days loadshedding, and now this price hike is no less than a bomb for

them," he added. The CNG sector, which is paying the highest tariff, has been facing severe gas

loadshedding three days a week, facing low gas pressure for another two days, while being

burdened with incessant power outages during the remaining days.

Economical effect of CNG load-shedding

Pakistan loses 500,000 Mcf/day of gas due to theft and a poor distribution network, forcing gas

companies to increase load shedding to textile mills and compressed natural gas stations, anofficial of the ministry of petroleum and natural gas said Thursday.

Unaccounted for gas, or UFG, a term used to describe losses and gas theft, is rampant in both

the Sui Northern Gas Company and the Sui Southern Gas -- the country's main gas suppliers --

the official said, adding that it was at 12.5% in 2010-2011 (July-June) as against just around

100,000 Mcf/d, or just 4%, in fiscal 2004-2005

The official said that reducing UFG to a reasonable level could help in meeting the requirements

of the fertilizer sector, power plants and CNG stations. The earnings of gas utilities could also be

enhanced significantly by overcoming these huge losses, he said Sui Southern Gas and Sui

Northern Gas, which earned around Pakistan Rupees 3.5 billion ($41 million) and Rupees 1.5billion, respectively, in the fiscal year ended June 30, 2010, could see earnings enhanced by 25%

if gas theft and losses were reduced, the official said, adding that line losses needed to be

lowered.

Pakistan currently produces around 4.2 Bcf/d of gas against demand for 5.2 Bcf/d, and this

shortfall is expected to widen to 3.18 Bcf/d in 2014, when gas supply is projected to rise by only

2% to 4.28 Bcf/d against a 43.5% projected jump in demand to 7.46 Bcf/d. Meanwhile, Asim

Hussain, federal minister for petroleum and natural resources, said recently that 190,000


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Mcf/day of gas was provided to 3,300 CNG stations across the country, but according to one

estimate, 10% of this gas was stolen each year -- accounting for 20,000 Mcf of gas. Separately,

the government will soon introduce smart metering and electric metering to check the usage

and supply of gas to CNG stations, the minister said. The federal government has also proposedto the ministry of law several measures to punish consumers resorting to illegal gas

connections. The proposed Gas Utility Act 2011 proposes six months to 14 years imprisonment

for gas theft along with hefty fines ranging from Rupees 10,000 to Rupees 3 million.

The CNG industry is on the roads protesting gas cuts while fertiliser sector is finding it hard to

recover its return on investment made on new plants over the last few years. The last years

assessment by the Asian Development Bank that power shortages were restricting economic

growth rate by two per cent of GDP per annum is no more valid. The latest rough estimate

indicates up to 3.5 per cent drop in the rate of economic growth due to natural gas and power

shortages. That should be an alarming sign for the economy, reeling under overall security crisis

along with under-investment in energy infrastructure .The situation is not only affecting the

daily life of common citizens, but also creating acrimony among the federating units, affiliated

to a dysfunctional centre. The Punjab government has accused the federation of causing over

Rs250 billion loss over the just concluded financial year on account of unfair gas distribution

policy.

Political Parties reviews about CNG load-shedding

People said they were facing severe problems due to three-day closure of CNG pumps. They

criticized the government, saying that incumbent government is not serious in resolving the

energy crisis and under constitutional pretext was victimising the people of Punjab. They

pointed out that no where in the country three day closure of gas was being implemented

except in Punjab.

Meanwhile PML-N leader and Member National Assembly (MNA) Pervez Malik has severely

censured the government for posing further increase in the petroleum prices and warned

the government to stay away from the anti-masses decision. In a press statement issued here

on Monday, Pervez Malik said that petroleum prices were already high and any increase would

not only lead to increase the production cost of the struggling for survive industrial sector but

would also wreck the national economy.

He that the increase in the petroleum products would cause another surge in the prices of

daily-use items and add the worries of masses that are already in deep trouble due to cruel

policies of the PPP-led government. He said that government was charging unjustified levy on

the petroleum prices for their lavish expenditures and not ready to pass on any benefit to the


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masses or the businessmen. He said that PPP government had no intentions to stabilize the

economy. He said that raise in petroleum prices will force the people to take to the streets and

stage protests. He said that the manufacturing sector was on the verge of collapse because of

irregular utilities prices, high taxes, abrupt and long duration of gas/electricity load shedding.

He said that the raise in the prices of petroleum products will affect in leveraging inflation

further by translating raise in cost of electricity, transportation and utilities. He said that the

PPP government was resuscitating public towards a dangerous civil war by burdening them with

high taxes/ prices of utilities and petroleum products and absolutely no move to amend the

situation. He said that the export industry was already besieged with the problems of excessive

gas electricity load shedding, dangerous law & order situation and increasing raw material

prices. The government has planned to give another shock to the industry by increasing the

prices of petroleum products.

Pervez Malik said that the present government had made dozens raises in the prices of petrol,

electricity & gas. He said that thousands industrial units had been closed down, large number of

industrial workers lost the employment and poverty graph was going up rapidly but instead of

announcing some relief package, government was busy to torture the nation. PML-N leader

said the industrial sector of any country plays a fundamental role for economic development

but PPPgovernment was taking measure adding its woes.

Pervez Malik said that prices of petroleum products would also give a big blow to

the agriculture sector as the diesel was being used in the agri-machinery and tube wells etc. He

said that cultivation cost would touch the peak while agriculture sector nose-dive.

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