Rural Household Sector Energy
Consumption
Introduction
According to the World Energy Outlook
(2016) statistics, at least 51 million people in Pakistan or representing 27%
of the population live without access to electricity. According to IFC, the
rate of energy for poor people is even higher with approximately 36% or 67
million out of 185 million without access to electricity. The National Electric
Power Regulatory Authority, in its annual State of the Industry Report,
concludes that approximately 20% of all villages, 32,889 out of 161,969, are
not connected to the grid. Even those households that are statistically
connected experience daily blackouts so that it is estimated that more than 144
million people across the country do not have reliable access to electricity.
As a result, Pakistani households use a mix of technologies to power their
homes and businesses. Household expenditures on energy for both rural and urban
customers are presented as follows:
Household expenditure on Energy
|
|||||||||
2010
|
2011
|
Growth % 2010-11
|
|||||||
Urban
|
Rural
|
Total
|
Urban
|
Rural
|
Total
|
Urban
|
Rural
|
Total
|
|
fuel & Lighting
|
7.06
|
8.01
|
7.6
|
6.89
|
8.74
|
7.91
|
-2.41
|
9.11
|
4.08
|
Household expenditure on Fuel and Lighting %
|
|||||||||
2010
|
2011
|
Growth % 2010-11
|
|||||||
Urban
|
Rural
|
Total
|
Urban
|
Rural
|
Total
|
Urban
|
Rural
|
Total
|
|
Firewood
|
5.02
|
29.04
|
19.56
|
3.84
|
26.79
|
17.84
|
-23.51
|
-7.75
|
-8.79
|
Kerosene Oil
|
0.12
|
1.64
|
1.04
|
0.06
|
0.87
|
0.55
|
-50.00
|
-46.95
|
-47.12
|
Charcoal
|
0.00
|
0.01
|
0.01
|
0.00
|
0.02
|
0.01
|
|||
Coal
|
0.01
|
0.05
|
0.04
|
0.02
|
0.09
|
0.06
|
100.00
|
80.00
|
50.00
|
Dung Cakes
|
0.88
|
7.84
|
5.09
|
0.50
|
7.63
|
4.85
|
-43.18
|
-2.68
|
-4.72
|
Gas Piped/cylinder
|
19.72
|
6.77
|
11.89
|
19.86
|
8.45
|
12.90
|
0.71
|
24.82
|
8.49
|
Electricity
|
70.95
|
41.41
|
53.07
|
71.69
|
41.43
|
53.48
|
1.04
|
0.05
|
0.77
|
Others
|
3.30
|
13.23
|
9.31
|
4.01
|
14.32
|
10.30
|
21.52
|
8.24
|
10.63
|
Household Energy
More than 50 % of the population,
mainly in rural Pakistan, relies on traditional biomass for cooking. Common
cooking fuels include firewood, agricultural waste and dung cakes. According to
a study about Balochistan and Sindh region in April 2007, it was appraised that
households use on average 920 kg of wood in winter and 560 kg of wood in summer
while in Sindh the numbers are 640 kg and 400 kg respectively. In Balochistan,
around half of the population collects their own firewood, while in Sindh most
households need to buy their wood. The burning of biomass in inefficient stoves
and without proper venting or air exhaust causes serious health problems.
According to WHO estimates indoor air pollution is responsible for more than
50,000 premature death per year in Pakistan. Especially women and children are
affected as they are most exposed to the smoke and soot from cooking. In
addition the burning of wood is contributing to deforestation which is
progressing at a rate of more than 2% per year.
A survey revealed that rural households
in Punjab spent on average about 9% of the total household income for fuel and
lighting. However, poor households are forced to invest up to 25% of their
monthly income in fuel, kerosene and batteries due to the dysfunctional market.
In general, non-electrified households spend USD 5 to USD 8 per month or an
estimated USD 2.3 billion a year on everything from candles, to kerosene lamps,
to battery-powered torches.
Due to poor distribution networks,
households in rural areas using LPG as fuel pay up to 10 times more than urban
households that benefit from subsidized natural gas for residential use.
Rural Punjab survety kis presented as follows:
Although the above Table presents rural household
energy for the Punjab only but nevertheless some important patterns can be presented . With
increasing income the usual consequences
related to energy consumption are : increased biomass consumption , explained
by greater access to cattle and land and by increased ability to purchase bio
fuels ; greater use of modern fuels and electricity for end uses other than
cooking , with lighting typically there is an increase in kerosene use ,
following a decline at higher incomes as electric lighting is installed; the
tendency for the consumption of modern
fuels is to saturate at the highest income level . These trends reflect that:
as spending in rural areas increase rural families can buy their way out of
biomass fuel and use more efficient and convenient modern fuels.
Fuels by income group
HESS estimates are presented as follows:
The above HESS estimates( percentage use ) , suggests that with increasing income :
firewood , kerosene, coal and dung cakes
use declines ; whilst that of gas and
electricity increases. Lighting plays a small part in the rural energy usage
, but it is important as in lower income groups lighting is the only usage that
requires use of commercial fuels . Families view improved lighting as a high
priority in achievement of living standards , lighting also presents the lower
income groups with substantial expenditure on purchase of equipment , which may
be kerosene lamps or electric fittings .. Energy consumption for lighting
increases quiet rapidly with income above a certain threshold.
Rural inhabitants produce and depend upon biomass
materials of all kind, most if these resources and the land devoted to their
production have alternative uses. Different income groups have different access
to biomass resources, land and cattle ownership defines the access of these
groups but even subtler factors like permission to collect wood or biomass is
accorded different to different income groups. Generally those who have the most
serious problems have the least ability to respond to mitigate the scarcity,
the poorest have the least access to land or cattle or permission to use “free”
resources .
Household size determines the quantity of energy
used and also it determines the income levels, larger families are richer and
use more energy. With household size increase per capita energy could fall of
remain the same but total energy consumption increases but at some point the
rate of increase in demand is dampened.
Rural Electrification
The
demand for electricity in Pakistan has increased dramatically within the last 5
years. Over half of this demand originates from the Punjab province where the
majority of the population resides. Households are mainly responsible the
increase of demand the main factor which is preventing the rollout of rural
electrification is the increasingly high distribution costs . Furthermore, due to the currently very low
electricity consumption/demand in rural areas the expansion of the grid into
these areas is merely not economical and hence not feasible. Utilities and
distribution companies are reluctant to roll out the grid since the revenues
from tariffs would never be able to provide the returns needed to recover the
investment.
Overall
Pakistan is struggling with a poorly performing power sector,. Main reasons for
this sub optimal performance is tariffs below cost recovery levels, power
theft, insufficient collection rates, and high technical losses As a
result, power generation companies face serious financial problems, making
investments in the sector very difficult. In addition, costs of power
generation, which is mainly based on fossil fuels, are very high averaging at
around 12PKR/kWh and up to 15PKP/kWh if technical losses are included. The main
factor which is preventing the rollout of rural electrification is the
increasingly high distribution costs. Furthermore, due to the currently very
low electricity consumption/demand in rural areas the expansion of the grid
into these areas is merely not economical and hence not feasible. Utilities and
distribution companies are reluctant to roll out the grid since the “revenues
from tariffs would never be able to provide the returns needed to recover the investment.
Due to high costs, the government subsidizes electricity tariffs, in order to
make them more affordable for consumers. In 2013, government subsidies for
electricity reached 1.3 billion USD; however, this did not recover the costs of
generation, transition and distribution. “This creates a budget gap that
curtails public investment in primary infrastructures, essential for the
economic development of the country This circular debt has now ballooned to
very large levels .
Energy Planning
Policymakers
neglect in energy planning and energy policies non-commercial/traditional
energy sources which are not even represented in national statistics (only
electricity and mining). This means that almost 50 % of the consumers
which are mainly rural households are ignored in energy planning and the public
investments for supply of power.
Moreover,
Pakistanis also among the Top 10+1 countries with largest number of people
using solid fuels for cooking as shown below in graph
Energy Poverty
Most rural households in Pakistan
remain in a state of energy poverty. Without access to conventional energy
sources like electricity and natural gas, people here, like in many corners of
the globe, use a variety of non-conventional energy sources, including kerosene
and traditional biomass like firewood, animal and plant waste. These households
can be termed energy poor, as the energy sources upon which they rely are not
enough to ensure a sustainable, reliable and continuous energy supply.
UN University conducted a survey in
27 rural communities. They used stratified samples, the first level of which
were rural communities that matched their criteria, namely, communities with or
without electricity but without access to natural gas. (This was their requirement
because households only use traditional energy sources in the absence of
natural gas.)
At the second level of sampling,
i.e., after selecting the rural communities matching our criteria, we drew a
random sample of households to ensure that households with different economic
characteristics were represented in the sample. Their conclusions were : the
excess inconvenience associated with the energy mix used by rural households ;
and a lack of sufficient energy to meet basic household needs — the energy
shortfall
The use of traditional energy
sources by rural households always comes with associated inconveniences that
are not associated with modern sources such as electricity and gas. From the
collection of firewood, to the buying of liquefied petroleum gas (LPG), rural
households are required to make extra-ordinary efforts to meet their domestic
energy needs. They found that 23.1% of rural households experience high degrees
of energy inconvenience, spending ample amounts of time and effort collecting or
buying different energy sources and 96.6% of rural households experience severe
energy shortfalls. The survey revealed that 91.7% of all rural households in
Punjab province of Pakistan are in the state of severe energy poverty.
Non Commercial energy
Traditional sources of energy are easily accessible and affordable for a majority of
rural
households. Their use, however, has serious implications for health, environment, and biodiversity. A higher demand for firewood can result in deforestation, loss of biodiversity, land erosion, and other types of harm to the environment [Heltberg, et al. (2000); Dewees (1989); Liu, et al. (2008)].
In
addition, burning animal/plant residue creates indoor pollution that can cause several respiratory and lung diseases [Awan, et al. (2013)]. In addition to health
and environmental problems, the use of animal/plant residue has several socioeconomic implications. For example, the collection of animal/plant residue increases the work load on women and children, who are prime collectors of animal/plant residue in rural areas. High deforestation can result in a wood shortage that may reduce the cooking frequency and/or the amount of cooked food, which has implications for the nutritional status of households [FAO (2008)].
Rural Urban disparity
LPG or kerosene is 10 times more
expensive than subsidized natural gas provided
for
residential use. The price differential between natural gas and petroleum-based fuels is exacerbating socioeconomic disparities between the urban middle
class and the rural poor a typical gas bill for a middle-class household
is about 500 rupees (Rs.),
or $5 per month, for cooking and water heating, whereas
LPG users spend over Rs. 2000 ($20) per month for cooking purposes alone. If the gas price for residential use is progressively
increased, there is an opportunity to save about
a quarter of the natural gas consumed in homes. This opportunity could be seized through
the installation of solar water heaters, which
cost only Rs. 30,000 ($300). However, these are currently
neither viable nor desirable for
residential consumers, given the low natural gas prices they enjoy. In essence, home consumers
have little incentive to install solar heaters when they receive gas at such low rates. Undoing the subsidy provided to the
residential sector will allow the savings to be ploughed back to the rural poor
by means of either reforestation or by provision of adequate stoves.
Fuel Wood
Large amounts of fuel wood are consumed for utilization at home.
As a result fuel wood is becoming
scarcer in the area. The women now have to travel farther and farther to
fetch fuel wood for domestic purposes. The Smokeless Stove is fuel-efficient
and it uses half as much fuel-wood as compared to the traditional stove. With
the introduction of Smokeless stove in the local community, gathering fuel wood
from the area will continue, however, the total amount collected in any given
time period will be targeted to be lessened so that the pressure for fuel wood
in the area is released and scarce forest reserves are conserved. The Smokeless
stove generates heat in a smaller area and is well insulated by mud and brick
enclave resulting in a smaller amount of fuel wood needed to generate the same
amount of heat in an open fire. The lesser amount of smoke resulting from a
smokeless stove compared to open fire cooking reduces the amount of harmful gas
emissions, including carbon dioxide and carbon monoxide, contributing to the
Green House Effect. To enable improved stoves to be introduced the following
steps are needed:
1.
Insufficient policy ,
strategy and regulation related to use of biomass in the cooking sector
2.
NGOs and CSOs have
developed stoves and other products for biomass based cooking but there exists
no mechanism to ensure quality of equipment and manufacturing in the long run.
3.
Unavailability of
sufficient information and data mapping of biomass resources across the country
make policy formulation and design of necessary interventions a challenge.
4.
Market for cook stoves is
very fragmented and is dominated by the informal sector.
5.
Limited awareness of indoor
pollution and its harmful effects on health within consumers has restricted the
uptake of clean and efficient cook stoves.
Electricity
is available to about 73% people, there is need to add a million people every
year Similarly gas is supplied to 25% people
about 2.0 million people need to
be connected to the gas network, whilst
improved wood stoves , stoves , solar cookers , biogas digesters , LPG
air mix plants , doubling the share of wind and solar energy
as well as small and micro
hydropower and solar heaters need to be provided to the population living in
areas where extension of gas -network is not economic , this process will mean that 2.4 MToE energy will be added to the total energy
supply each year ..To meet these targets about: 2 million people need to be
added every year to the gas network; 0.35 million stoves need to be provided
every year; share of biogas, biomass, wind, solar and micro hydroelectricity
will need to be increased by 10% every year.
To achieve targets of provision of energy to people living away from
sources of commercial energy the following is recommended:
1.
Launching a national wide program for
provision of clean cook stoves through private- public partnership. NGO have
developed such clean stoves.
2.
Financial mechanisms such as micro
finance, consumer finance, and concessionary soft loans will be promoted for
distributed solar systems and energy efficiency retrofits.
3.
Off grid lighting programs targeted to
the: 27 poorest districts of Pakistan; 3 poorest districts of AJ&K; 9
poorest districts in GB, need to be prioritized.
4.
About 0.8 million households will have to
be provided alternative sources of
cooking energy each year to reduce usage of traditional fuel for cooking .
5.
60 No’s LPG Air mix plants need to be
provided in next 5 years.
Rural and urban
wood energy consumption
Rural and urban wood fuel
consumption have distinct patterns. Specifically, available data indicate or
explain the following distinguishing characteristics between rural and urban
fuel wood:
·
Fuel wood consumption tends to be higher in rural areas, with more
households in rural areas using fuel wood.
·
Fuel wood tends to be the dominant fuel for rural household energy
end use, particularly cooking. In urban areas, fuel wood competes with other
fuels and might not play the dominant role.
·
Cooking takes up a big portion of rural household end use energy
consumption. In urban areas, other end use energy consumption can be
significant.
·
Household income determines fuel wood and total energy consumption
to a large extent, but the pattern or degree of influence is distinct for rural
and urban areas. For example, the shift to modern fuels with increasing income
is more pronounced in urban areas.
The rural areas account for the bigger portion of total fuel wood
consumption. In Pakistan, for example, the rural fuel wood consumption exceeded
urban fuel wood consumption by a factor of more than five, equivalent to 84% of
total fuel wood consumption.
Fuel wood, therefore, tends to be the dominant fuel in rural areas
and is primarily used for cooking. In the rural areas of Pakistan, fuel wood
accounted for close to 60% of household energy use. In urban areas, fuel wood competes with mostly
modern fuels. Urban Pakistan in which
natural gas accounted for 30% of household energy consumption, while fue lwood’s
share remained at around 38 %
Wood fuel flow
The contrasting characteristics between rural and urban fuel wood
consumption also determine how fuel wood supplies reach the final energy
consumers. In rural areas, fuel wood is not usually a commodity that is traded
as in urban areas. Available data show that in most cases, fuel wood in rural
areas are collected freely from the local environment, while most, if not all,
urban households buy fuel wood and charcoal from traders and retailers.
However, there are indirect costs associated with acquisition and use of fuel
wood in rural areas. These costs are linked to the accessibility of fuel wood
sources. Rural households, in particular women and children, in many cases
spend considerable time and travel great distances to collect fuel wood. In
urban areas, wood fuels are commodities that compete with other fuels to
satisfy household energy needs. Moreover, there is stronger tendency for urban
fuel use to increase, diversify, and switch from fuel wood and charcoal to
commercial fuels (for example, LPG and kerosene). Thus, fuel consumption patterns
in urban areas may be changing more rapidly than in rural areas.The sources of
fuel wood is presented as follows:
| Rural |
Low
|
Medium
|
High
|
Total
|
| Buy only |
22.5
|
29.8
|
40.2
|
28.8
|
| Collect only |
69.1
|
58.5
|
50.8
|
60.9
|
| Buy and Collect |
8.3
|
5.7
|
9.1
|
10.3
|
| Urban |
Low
|
Medium
|
High
|
Total
|
| Buy only |
78.4
|
85.0
|
91.6
|
84.3
|
| Collect only |
18.8
|
9.4
|
5.8
|
11.5
|
| Buy and Collect |
2.1
|
5.8
|
2.3
|
4.2
|
Moreover, wood fuel flow studies provide information about opportunity cost associated with fuel wood collection. It is shown, for example, for Pakistan that this tends to be higher in rural areas because of the greater time and distance involved.
Wood fuel flow studies also reveal the main actors in the fuel wood supply and demand chain. The main agents in fuel wood collection, for instance, could vary with respect to land ownership. The extent of their involvement depends on the income class as indicated by land ownership. The landless class, therefore belonging to the lowest income level, employs more women and children, while the big farmer class, with presumably higher income, employs more hired labor in fuel wood collection.
Wood fuel supply
Fuel wood is sourced from forest and agricultural lands. Pakistan have less than 10% forest cover . However, later studies also show that more
and more fuel wood is being collected from non-forest lands. In Pakistan, The
HESS survey shows that 40% of sampled households in Pakistan collect fuel wood
from private lands and another 32%, from own lands. Only 13% are collecting
from state forest lands.
However, these national figures have to be interpreted with
caution else one may be misled to think that forests have become an unimportant
source of fuel wood. Information at sub-national levels should give a more
accurate picture. It is shown for Pakistan that more households than the
national average are collecting from state forest lands in three of the four
provinces of Pakistan, where the extent of forest areas is greater. In the
other province, where forest lands are limited, households naturally go to
places where trees are available. Moreover, forest lands account for only less
than three percent of Pakistan’s total land area, thus limiting the forests’
contribution to total fuel wood supply.
. \Thus, fuel wood collection practices are also dictated to a large
extent by the availability of trees.
Punjab
|
Sindh
|
NWFP
|
Baluchistan
|
Pakistan
|
|
| Own land |
38.7
|
14.1
|
39.9
|
8.4
|
31.7
|
| Other private land |
40.1
|
55.3
|
24.4
|
9.9
|
40.3
|
| Common land |
9.9
|
9
|
14.7
|
48.1
|
12.1
|
| State forest land |
8.4
|
17.8
|
17.1
|
26.3
|
12.6
|
| Other (waste wood, etc.) |
2.9
|
3.8
|
3.9
|
7.5
|
3.3
|
| Total |
100
|
100
|
100
|
100
|
100
|
Forests
Pakistan has 4.2 million ha of forest
and planted trees, which equates to 4.8 percent of the total land area. Forty
percent of the forest area comprises coniferous and scrub forest in the
northern hills and mountains. The balance includes irrigated plantations,
riverine forests along major rivers of the Indus plains, mangrove forests of
the Indus delta and trees planted on farmlands.
With only 0.05 ha of forest per capita
against a world average of 1.0 ha, Pakistan is comparatively forest-poor. The
high population growth rate is pushing
the figure further down and, at present, it is not possible to expand public
forest area at a high enough rate to keep up with demand for forest products.
However, farmers are encouraged to establish plantations on farmlands and
wastelands to help ameliorate the situation.
Benefits from forestry in Pakistan
include the following:
- Five
hundred thousand workers are employed in forestry and related industries
such as logging, village carpentry and manufacture of timber components
for the construction industry. However, the forestry sector contributes
only 0.3 percent to GNP.
- Between
1996 and 2000, on average, 31.66 million m3 of round wood and
2.35 million m3 of industrial round wood were produced annually
from state forests and farmlands. A further 532 000 m3 of
industrial round wood was imported annually to meet national demand.
- Forests
supply 32 percent of Pakistan’s
total energy needs in the form of fuel wood. Ninety percent of rural and
sixty percent of urban households use fuel wood, together with other forms
of biomass as their primary energy source.
- Forests
provide forage for one third of Pakistan’s
86 million head of livestock. Leather, wood and other livestock products
contribute US$400 million or 9 percent of total export earnings. Trampling
and browsing by increasing numbers of livestock are causing forest
destruction and uncontrolled grazing is a major obstacle to sustainable
forest management.
- Forests
are vital in protecting the catchment areas of reservoirs used for power
generation and irrigation. Agriculture, which contributes 26 percent to
GDP, is highly dependent on irrigation in Pakistan and annual losses due
to flooding, soil erosion in upland watersheds and siltation in reservoirs
and irrigation works is estimated at Rs.2.3 billion.
Northern Irrigated Areas
More than any other area, this
region (consisting mostly of Punjab), suffers from high population pressure and
high fuel wood production needs. However, it is probably closer to maintaining
a high-throughput fuel wood production system than any other region. The
transition to a sustainable management system seems to be further advanced in
these areas than elsewhere. However, care should be devoted to ensuring that
neither structural impediments nor institutional barriers should be allowed to
prevent this transition from following through to completion.
Southern irrigated areas
Comprising mostly Sindh province also faces
high population pressure. It also needs to be transformed into a high
throughput fuel wood production system. At present, it appears to be lagging
behind its northern neighbor in the transition to high production/high
consumption sustainability, and the reasons are not immediately obvious. 22
During monitoring, attention should be paid to seeing that rapid progress
occurs in this transition, and that tree-planting and production continue to
increase in importance. Despite this concern, it must be pointed out that Sindh
has been densely populated and heavily cultivated for decades. Unless it can be
shown that some critical threshold is about to be crossed, the situation does
not call for desperate actions, but rather concentrated attention.
Conclusion
Because of the limited access to
modern energy sources, households rely on traditional sources excessively, which may have a negative impact not only on human and animal health but also on the environment. These
results suggest that the conversion of traditional energy sources into modern ones, such as, biogas, use of energy efficient appliances, etc. can have a positive impact on the environment and sustainable economic growth.
The energy plan of the country addresses only commercial energy,
non commercial energy is not made a part of the national energy plans. This is
a serious shortcoming as significant amount of energy is consumed in the rural
sector and in the near future the decision makers might get a surprise if
firewood or agriculture waste is not available. It is absolutely essential that
energy plans address the non commercial use as well. There is not enough data
to do that, it is suggested that Hydrocarbon Development Institute of Pakistan
(HDIP) who prepares the Energy Year Book should also be entrusted with the
responsibility of collecting non commercial energy data. The Institute be
funded and staffing increased so that in the near future enough data is
available to prepare meaningful energy plans.
Compared to HESS surveys If both the scope of
the survey instrument and the size of the sample were reduced, the monitoring
activity could be carried out on an annual or bi-annual basis at a relatively
limited cost. Once again, the facilities of FBS could be used effectively for the
questionnaire administration, but the analysis could be most effectively
carried out by the staff of the Energy Wing Ideally, the questionnaire should
contain minimum information about fuel consumption, socio-economic
characteristics, appliance ownership, and tree-planting to allow a comparison
with the larger questionnaire used as part of the HESS project. But the
questions could be reduced in complexity in order to facilitate its
administration. Although some calculations are necessary to suggest the magnitude
of the sample to be used, a target might be set at 10% or 20% of the larger
HESS sample of 4800 households. In this way, the cost and time commitment
necessary to carry out the survey could be reduced so that it could be repeated
every second year. After five or ten years, it would then be desirable to
re-run the entire large exercise. In this way, household energy can become a
module of the normal household survey rotation used in Pakistan and other
developing countries. This rotation would enable the Energy Wing to monitor
what is happening in the field and fine-tune policies in order to incorporate
the latest trends. It would also enable the Energy Wing to identify the trends
are, since at present, they only have one data point to work from.
Update:
Mar., 11, 2019:
Only 20% of Pakistan’s population has
access to clean piped natural gas (PNG) while the rest use biomass in the form
of uplahs and shrubs or even trees, which causes deforestation. Most of the
biomass, in the manner it is used, causes health issues as smoke and carbon
dioxide create lung and eye syndromes and uplas involve bad hygiene. A smaller
percentage uses expensive liquefied petroleum gas (LPG) or kerosene. If rural
migration is to be discouraged, lives in these areas have to be improved.
The PNG network cannot be extended to these
areas. LPG, biogas and kerosene are the alternative clean fuel options.
Already, small and poor consumers in urban centres are being offered PNG at
highly subsidised rates. However, the poor in rural areas are without any
subsidy in this respect. According to the Oil and Gas Regulatory Authority
(Ogra) report (2016-17), annual LPG consumption stood at 1.2 million tons, with
share of domestic, industrial and commercial sectors at 37%, 36% and 27%
respectively. The LPG’s share in gas market stands at less than 8% and 58% of
LPG demand is met through local production and the rest is imported.
LPG is almost as expensive as petrol. LPG in
February 2019 was sold for Rs121 per kg at Ogra-controlled rates and Rs150 per
kg in the black actual market. In terms of British thermal units, which enable
us to compare prices across fuels, this boils down to Rs2,669 per million
British thermal units (mmbtu) at controlled rates and Rs3,309 in the actual
market.
Compare it with the PNG tariff of Rs142, LPG
prices are 19 times higher and comparing with the highest PNG tariff, which is
being contested, LPG prices are 83% higher. Only 20% of people have access to
the PNG network while the rest are consuming biomass and the wealthier ones use
LPG. Clearly, some reforms are required in LPG prices.
LPG is subsidised in India for the poor and
the subsidy is transferred directly to the accounts of LPG consumers to avoid
misuse. On February 8, the subsidised LPG price was INR493.53 per cylinder of
14.2 kg. There is a subsidy of around INR200 per cylinder. In Pakistan, the
Ogra controlled/suggested price is Rs1,427 per cylinder of 14.2 kg, which is
30% higher than the corresponding price in India. However, India is trying to
substitute LPG with PNG. Possible motivation could be convenience, safety and
price. In Pakistan, the retail LPG price of Rs2,669 ($19.34) includes 23.3% of
GST and other taxes per mmbtu as opposed to the highest gas tariff of Rs1,460
against which there is a lot of hue and cry.
LPG prices are almost equal to gasoline
prices and twice those of compressed natural gas (CNG). Thus, it appears that,
there is practically no advantage in using LPG as a substitute of gasoline.
However, CNG prices are almost 50% of LPG and gasoline prices, a clear
substitution case. Kerosene at Rs82 per litre is 77% of high-speed diesel (HSD)
price and 91% of gasoline price. The incentive for adulteration is there by
mixing cheaper kerosene with expensive HSD and is reportedly being done.
In India, kerosene is sold for PKR56 per
litre as opposed to Rs82 per litre in Pakistan. In some states like Chennai, it
is sold at 50% of the price elsewhere. India is moving towards PNG and LPG and
kerosene demand is going down there. There has been and continues to be a major
adulteration problem in India of mixing cheaper kerosene with expensive
gasoline and HSD. Kerosene subsidies are going down in India. Kerosene and LPG
rates are almost equal there in terms of mmbtu.
There is a general case of subsidies on LPG,
if LPG prices are compared with PNG prices. At a minimum, exemption from all
taxes may be considered – after all largesse and support should not be
restricted to the areas on PNG network. LPG-air mix plants have been set up
keeping this in view. However, these plants benefit the rich who live in the
developed network areas. Poor invariably lives in remote and least developed
areas.
As a reference, the gas tariff of LPG-air
mix plants of Rs600 per mmbtu may be kept in mind. However, it may be too much
of a subsidy, if extended to the LPG cylinder. LPG-air mix and LPG cylinder
should have some comparability, if not equality. In northern areas, there is a
humanitarian case as well as environmental one to provide cheaper alternative
fuel. Poverty is widespread there and trees are cut for household fuel needs.
LPG is sold in the black market at much higher prices than in lower areas.
There is a strong case for providing
subsidies both for kerosene and LPG in these areas. The minimum subsidy is the
waiver of petroleum levy and GST. This subsidy can be a general one and
additional subsidies out of the budget should be provided to the poor. Although
reference to India is not liked, one is prone to suggest Indian subsidised LPG
pricing. On the same argument, there is
a case for subsidy on kerosene. So long as poverty and inequality persists,
there will be a strong argument for subsidies to the poor, be it in fuel or
elsewhere.
Subsidies are always misused and opposed by
the International Monetary Fund (IMF). Cheaper LPG meant for northern areas may
be sold in lower areas or for commercial vehicles. No perfect safeguard is
available against malpractices. However, solutions can be explored and
implemented. Involvement of public-sector companies in distribution, special
cylinders, etc can be adopted as a safeguard.
Eighty per cent of the population is using
LPG, kerosene or biomass. Biogas can be cheaper and competitive in agricultural
rural areas, requiring attention of the policymakers. LPG-air mix plants have
been installed and the present government has not cancelled those schemes.
Biogas may substitute LPG in agricultural
areas. Biogas-based small distribution networks are feasible. Provincial
governments and local bodies may be encouraged and facilitated in establishing
these plants.
Biogas is not a new concept. It has not
acquired a market share as it could have. Most of the biogas schemes have been
for small family-sized production for individuals. There has not been much of a
movement for community-based production and distribution.
Public-sector companies like SSGC and SNGPL
are in best position to play a facilitating role. A policy is required to
encourage and finalise such systems. Technical assistance, demonstration
projects, cheaper credit and loans can go a long way in increasing the role of
biogas and improving living conditions in rural areas. Punjab and Sindh are
adequately positioned in this respect. Community solar and biogas is the name
of the new order.
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