IMPACT OF PERSISTENT ELECTRICITY CRISIS IN PUNJAB

SALE OF ELECTRICAL APPLIANCES LIKE REFRIGERATORS, DEEP FREEZERS, AIR CONDITIONERS, TV SETS DECLINE BY 35-40 PERCENT

KANWAL SALEEM
(feedback@pgeconomist.com)

Sep 3 - 9, 20
12

Undoubtedly, Pakistan possesses huge potential for the growth of electronics industry but persistent electricity crisis, smuggling of electronic items and unclear policies are hindering the growth of this important industry.

Currently, Pakistan is merely involved in assembling the electronics goods, especially the TV sets, while major manufacturers are not producing radios, which still have a large market in our rural areas. All the radios are Chinese products available in local markets. The ongoing electricity crisis in the country has badly hit the growth of this industry.

Unlike automobile industry, there was no deletion policy adopted in electronics industry as a result of which transfer of technology did not take place. All major components in electronics industry are imported. This situation indicates that even large multinational companies assembling TV sets are as a matter of fact engaged in import business, as they are actually selling the imported parts just after giving them the shape of an assembled product.

As far as electrical appliances are concerned, Refrigerators, Deep Freezers, Air conditioners are being manufactured within the country, yet the industry is depending on imported Compressors for manufacturing these items. Pakistan has a considerable market for a host of electrical items almost all of them are being imported or smuggled into Pakistan.

A survey of local Electronics Market at Mozang Chungi reveals that the sale of electrical appliances like Refrigerators, Deep Freezers, Air conditioners, TV sets has declined by 35-40 percent due to current power crisis. Not only traders have laid off labourers but the daily wage earners had also badly effected due to electricity shortage.

On the other hand, the sale of mobile handsets and computing devices has not effected due to power crisis. A mobile dealer at Hall Road, Ajmal Waqas told PAGE that they are facing difficulties due to power failure but on overall basis, the sale of Mobile Phones has not dropped like other business like TV sets. "We are forced to work in difficult environment in tough hot weather conditions but left with no other options except to continue out business through alternative arrangements like UPs to carry on business activities.

According to a report released by the London-based research firm Business Monitor International, Pakistan's consumer electronics market is expected to grow by an annualised average of about 13.3% to $3.3 billion by 2016.

The consumer electronics market, defined as including computing devices, mobile handsets and audio/visual products such as television sets, is projected to be worth about $2 billion in 2012. This is expected to increase to US$3.3bn by 2016, driven by a rising population and growing affordability.

In 2011, spending on mobile handset imports continued to grow strongly, but demand for high-cost consumer durables such as television sets were affected by inflation and rising interest rates. A weak economy means that market development will depend on action to reduce the inflow of illegally imported television sets and fake brand mobile handsets.

However, BMI expects that growth will be driven by improved information technology infrastructure and more credit availability. The market's considerable potential is currently depressed by a large grey market, poor intellectual property rights protection, an unstable economic and security situation, and weak distribution channels. Reforming high national and provincial taxes and tariffs on products ranging from computers to prepaid mobile cards would boost the market.

Computers accounted for about 17% of Pakistan's consumer electronics spending in 2011. BMI forecasts Pakistan's domestic market computer hardware sales (including notebooks and accessories) of $334 million in 2012, up 7.1% from $312 million in 2011. The research firm forecasts that this segment of the market will grow by an average of about 8% between 2012 and 2016.

The abolition in the 2011 budget of the general sales tax (GST) on imported computers should boost the market. However, the government denied plans to introduce a ban on imports of used computers and accessories.

The audio/visual devices segment accounted for about 36% of Pakistan's consumer electronics spending in 2011. Pakistan's domestic AV device market is projected at $724mn in 2012 and is expected to grow at an average annual rate of about 13% between 2012 and 2016 to a value of almost $1.2 billion in 2016. Television sets remain the core product in this category, but the growing availability of smuggled colour television sets is seen as a market inhibitor.

Moreover, mobile handset sales are expected to grow at a compound annualised growth rate of 13% to 32 million units in 2016, as mobile subscriber penetration reaches 77%.

Revenues growth is expected to be slower due to lower average selling prices of mobile handsets, with most handsets sold at less than $50. Low-cost Chinese handsets have made substantial market inroads, but established brands hope to take back some market share, following the government's ban on imports of mobile handsets without IMEI numbers.

According to the Lahore Chamber of Commerce and Industry (LCCI) President Mr. Irfan Qaiser Sheikh, the province of Punjab is the worst hit by the electricity shortage and only last year it lost three percent of its GDP due to power crisis. Due to long hours power cuts the investment scenario had spoiled in the province and so much so existing industrial units had curtailed their productions. Acute electricity and gas shortage had not only crippled the trade and industry but also brought widespread unemployment and poverty.

He said Punjab contributed nearly two thirds to the GDP of Pakistan, adding Punjab paid for 80 percent of electricity bills and got only 60 percent of electricity units, yet Punjab was being made the worst victim of injustice. He said the Energy Conference 2012 had pledged to reduce and equalise loadshedding throughout the country, yet the situation had not improved, adding awful prolonged loadshedding was hitting all sectors of economy including trade, industry and agriculture.

The LCCI President said the private sector was engine of the growth and in the developed countries it was facilitated to the maximum but in Pakistan circumstances were quite the other way round. He said the industry needed continuous supply of electricity to keep the units operational and to complete the export orders well within the given timeframe but only because of the shortage of electricity the exports were not up to the mark. He said Pakistan had already lost a number of global markets and the new power cuts would further aggravate the situation.

Export based textile industry in Faisalabad and Sports based Industry in Sialkot are facing severe electricity load shedding crisis spanning over 14 hours per day, plunging the industrial productivity and fear of default on export orders.

Criticizing the unscheduled and arbitrary forced load shedding the exporters said that unprecedented and irregular electricity load shedding for textile and Sports goods industries was playing havoc as the supply was cut down hour by hour. In this unannounced and ever changing shut down, the raw material, the coarse cloth, the print colors and semi finished textiles were being damaged causing millions of rupees loss to the manufacturers and exporters and the production program of the mills was totally disrupted and the productivity has been reduced, a textile exporter said.

Pakistan is in the grip of a serious energy crisis that is affecting all sectors of the economy and the various segments of the society. To overcome the situation, a change of attitude and a change of life style is needed at the national level which should be triggered by the ruling elite and followed by all segments of the society that have access to electricity. Energy conservation or efficient use of electricity is what is needed at this crucial time. There are three major users of electricity i.e., industrial sector, transport sector and domestic/household sector and they need to be educated and motivated to play their role in energy conservation. A revolutionary approach is needed to tackle the problem of electricity crisis.