LNG-dependent is original sin in our energy plan

There is a big problem with our energy policy as we have adopted a strategy to import LNG at high prices, rather than giving importance to our own natural gas exploration and extraction. And, this is the original sin in our mega plan for the energy sector. The economy has to pay for it.

Costly LNG is putting a strain on the country's forex reserves with the macroeconomics already being under pressure from all corners.

But there is no alternative to keep the core sectors of production up and running. We have to find ways to ensure supplies of fuel and electricity to industries and agriculture by slightly trimming spending on a few sectors that will not face much trouble for that.

The short-term damage to manufacturing and other sectors, owing to gas and fuel oil shortages, will have far-reaching negative effects. 

Fuel sufficiency is directly related to industrial production, food security and overall economic stability. It can never be a well-thought-out decision to interrupt factory production by not importing required fuel only to take the pressure off forex reserves.

If the gas supply is not guaranteed, production of export-oriented industries will fall, so will export earnings. Then, it will not be possible to consolidate the reserves. 

Besides, the industries catering for domestic needs will see their production decrease because of the fuel crisis. As a result, we may need to import goods that we now locally manufacture, which will cause a further depletion of the reserves.  

Stopping fuel imports to check the fall in forex reserves may lead to a drop in agricultural production. Then, to meet the demand, we will have to increase food imports, which will erode the dollars we are now saving with various measures.

We need to reframe our strategy, keeping in mind short- and medium-term solutions to consolidate the energy sector without stopping the wheels of the economy.

In the medium term, investments in gas exploration should be aggressively increased by identifying the root causes behind the energy crisis. And, in the short term, to keep the wheels of the economy turning, importance should be given to supplies of necessary fuel to industries even if we need to resort to imports.

Instead of stopping imports, the government should properly execute its austerity measures and curtail spending. It needs to tighten its already-taken measures, such as restrictions on imports of non-essential goods, to give relief to the forex reserves.

Prof Mustafizur Rahman is a Distinguished Fellow, CPD