Power and gas sectors: end to cross subsidy proposed

[Naveed Yaseen]

ZAFAR BHUTTA
ISLAMABAD (April 10 2009): Planning Commission has proposed end to the cross subsidy in power and gas sectors to provide relief to the industry by October 2009. Sources told Business Recorder that the Energy Efficiency and Conservation Consultative Group held its meeting in Planning Commission on March 31 and proposed energy efficiency sector roadmap.

Under the roadmap, it has been proposed to prepare the draft of energy tariff rationalisation by September 2009 that will contain the end to the cross subsidy in power and gas sectors. Industry is of the view that cross subsidy is a burden. The government is expected to approve the programme by October 2009, sources said.

The government is giving subsidy on gas to the domestic consumers and fertiliser sector. Other industrial sectors including textile are pressing the government to remove the cross subsidy to provide relief. They are of the view that due to burden of cross subsidy, the cost of doing business has increased making them uncompetitive in the global market. In power sector, the government is also giving cross subsidy to the domestic consumers and the industry has expressed its reservations as it claims this has resulted in an increase in the cost of doing business in Pakistan.

Pakistan is suffering from an acute energy crisis caused by insufficient energy supply capacity, poor sector performance and inefficient use of energy resources. Pakistan needs to embark on a determined and sustained long-term plan to optimise the energy mix and its use across all the sectors of the economy.

Sources said that the government is preparing to adopt the Energy Efficiency Sector Roadmap for 2009-16 and investment programme. The roadmap will comprise a series of measures of correlated policy, regulatory and institutional measures and capital investment aimed at establishing a dynamic business environment for sustained transformation of the energy efficiency market in Pakistan.

The consultative group has proposed that the role and position of Enercon be re-evaluated and be focused on specific focal areas notably in energy policy and regulatory advice, information dissemination and market facilitation. It is suggested to allocate the task of energy efficiency implementation to the respective supply, regulations, vendor, service and end use entities. In such a broad stakeholders approach, the creation of EE/DSM cells or departments in the respective agencies and their individual capacity building through training and external technical assistance programmes should be undertaken.

The roadmap outlines the financing possibilities and according to investment needs assessment, separate financing instruments and modalities would be set up for market segments eg industrial upgrade and replacements, vehicle tune ups, building retrofits, small and medium term enterprises and energy service company operations over the investment programme period. The effort will be made to consolidate and co-ordinate available concessional IFI assistance towards this end as well as to leverage other sources of funding, particularly carbon financing. The net outcome of these efforts would be measured in terms of energy savings, reduced energy intensity (energy consumption per unit GDP produced) and reduced carbon footprint of Pakistans economy as a whole, while improving energy service to all end users.

The roadmap will help scale up deployment of proven technologies through public investments in all major energy consuming sectors and markets including industry, transportation, domestic and commercial buildings and agriculture as well as the energy supply chain (energy production, generation, transformation, transmission and distribution). The immediate actionable and low-cost policy directives are required to be issued and existing anomalies and contradictions removed to be able to achieve fast-tracked energy savings while more detailed policies, laws, regulations and procedural requirements can be devised to affect a long-term, permanent transition towards efficient energy use in both public and private sectors.

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