Background

The shortage of gas in the country has prompted the government to start
restricting its supply, initially to large consumers only but over time
even households and small commercial establishments are facing
curtailments in supply. Energy shortage is one important reason behind
Pakistan’s lagging economic growth. Various studies have tried to
determine the economic cost of energy shortages. Although there are
differences in the magnitude of the estimated costs across these
studies, there is a consensus that Pakistan’s competitiveness is
declining due to energy deficits.

These deficits impose high costs on producers through losses in
production, labour time and income. These costs are particularly high
for textile sector and smaller firms. According to some estimates,
energy shortages have reduced the potential GDP growth rate by 2-3%. The
crisis has also caused domestic businesses to postpone investment
decisions and international investors to relocate their businesses.
Energy shortages have also forced the closure of a large number of
businesses, exacerbating the already high levels of underemployment and
unemployment.

Under the current scenario, given the gas shortages, all gas consumers
cannot be protected. There are political economy issues in targeting gas
sector reform objectives. For example if government’s priority is to
kick start and sustain medium term growth and job creation, then highly
preferential treatment of residential gas consumers will need to be
curtailed so that manufacturing units can increase capacity utilisation.
This of course will  require  political  will  and  ability  of  the
 government to  clearly communicate their  objectives  to  the
stakeholders and consumers of gas.