Public oil and gas companies planned to be privatized

Engineering Post Report

The federal government plans to privatize public oil and gas companies  for various concerns,

No immediate more details in this regard are available from official sources concerned. The federal government has already decided to stop building coal-fired power plants in the country  because of environmental issues and concerns.

While having a look at the energy sector, it is to be stated pointedly that the use of energy has increased significantly due to various inventions and innovations of common use made during the last century. Thus almost all human activities have become more dependent on energy. For developing nations in particular,  there was fundamental need  for reliable and affordable energy. In these countries including Pakistan, energy demand  has been increased due to expansion in industry, modernized agriculture, increased trade and improved transportation.

Pakistan is dependent on energy imports because there was lack of investment in indigenous  resources of  hydro, natural gas and ignite. Biomass was the latest energy source in the country.

Due to significant increase in electricity demand in the country for various reasons,  both state-owned gas companies and  Independent Power Producers (IPPs) were actively engaged  in producing electricity.

However,  fiscal sustainability had become  a challenge  due to increase  in energy payments. This energy  deficiency had begun from a fuel mix transformation which was initiated  two decades ago, when  power generation  used to rely  more on imported furnace oil  than hydropower.

The current energy crisis, according to the sources concerned,  began to manifest  itself by late 2007.  The problem had evolved over the years from one  of chronic power supply  deficits to one where there was excess installed  capacity but not enough cash flow in the system to run it. The latter created ‘circular dent’ issue.

Specifically, the circular debt  in Pakistan’s  energy supply chain referred to the cash flow shortfall incurred  in the power sector  from the delayed/non-payment of obligations  by consumers, distribution companies and the federal government as such.

It has ,however, continued to grow in size over the years, rising from 1.6 per cent  of Gross Domestic Product (GDP)  i.e. Rs 161 billion in 2008 to 5.2 per cent of GDP i.e. Rs 2150 billion in June 2020.

The incumbent federal government was giving  prime importance to resolve this and accordingly working on various options to reduce circular dent, the sources maintained.