NEED FOR AUGMENTING INFRASTRUCTURE
GDP PEGGED DUE TO DEPLETED INFRASTRUCTURE AS LESSER MONEY IS SPENT ON PSDP
SHABBIR H. KAZMI
Oct 29 - Nov 4, 2012
There can't be denying to the fact that Pakistan's economic growth has been pegged down because of electricity and gas shortages, public transport is highly inefficient but costly and exporters have to depend on the foreign airlines and shipping companies for import/export. Failure to construct road and modern storage facilities results in loss of nearly 40% of total produce. This deprives the farmers of fair return and country to earn extra foreign exchange.
Around the world countries invest heavily in improving supply and bring down the cost of transportation, utilities and overall infrastructure to boost GDP growth rate. This on one hand provides new jobs to millions of people and on the other hand improves earnings of various industries, cement and steel industries being the largest beneficiaries. As against this the successive governments have failed in implementing public sector development program. The result is depleting infrastructure is having a toll on almost all the segments of the economy.
In China electricity is supplies to industrial units, particularly export oriented units at concessional tariffs. As against this Pakistan not only faces prolonged outages of electricity and gas but there is persistent and substantial increase in the tariffs. Power plants are inefficient, transmission and distribution networks incapable of taking more loads. While public sector utilities have been denying new connection on the pretext that they don't have ample supply, pilferages have been going on with the connivance of the staff of utility companies.
One of the reasons for the hike in electricity tariff in Pakistan is the heavy reliance on fossil oil, at present hovering around US$100/barrel. The volatile situation in the Middle East and North Africa (MENA) is keeping oil prices high. Some critics have been saying that crude oil prices are kept at higher prices to make oil and gas exploration an attractive business. Though, very few people subscribed to this stance, the latest details show that shortly the United States will become the largest producer of oil, surpassing production of Saudi Arabia.
While the developed countries kept on working on the development of alternate sources of energy, Pakistan failed in exploiting its inherent advantage of Thar coal and bio fuel (E-10). A lot has been written and talked about Thar coal potential but hardly any progress has been achieved. According to media reports lately Adian Developed Bank (ADB) has told Pakistan that it should focus of using imported coal rather than the indigenous one and also termed Thar coal 'dirty coal'.
Though, it is a difficult pill to swallow it is also a fact that multilateral donators are responsible for Pakistan's energy crisis. However, they make the things look different and people say the Government of Pakistan (GoP) is not serious in exploiting its three competitive advantages: 1) low cost hydel power generation, 2) Thar coal and 3) sugar industry.
According to the experts sugar mills operating in Pakistan are capable of 1) delivering up to 3,000MW low cost electricity and produce huge quantity of ethanol. However, both the options could not be used because of the policies being dictated by the 'oil lobby'. The only snag is bulk power purchase tariff. While mills are demanding tariff equivalent to the one being paid to independent power producers (IPPs), the policy planners are not ready to offer that. Policy planners say, "Since sugar mills will mainly use baggase, these can't be offered higher tariff". However, they tend to forget that initially mills will have to use substantial quantity of oil, till baggase can be made available in substantial quantities.
The rationale is that granting sugar mills status of IPPs will encourage the mills to crush more sugarcane, which will automatically increase production of molasses, the basic raw material for producing ethanol that has to be blended with motor gasoline to make E-10. The beauty of this fuel is that 1) it will be sold through existing petrol pumps and 2) no additional gadgets have to be installed in the vehicles.
Due to the rising cost of POL products, consumers had shifted to using CNG and the policy was fully supported by the government. Permissions were given to establish thousands of CNG stations and equipment worth billions of dollars was imported. However, lately the policy has become bias against use of CNG vehicles. Therefore, it is imperative that the government ensures availability of alternative fuels at affordable cost before imposing restrictions on use of CNG by suspending its supply for days.
Cost of transportation and fairs are on the rise due to persistent increase in the prices of POL products as well as CNG. There is pressure on the government to ban use of CNG in public transport, which is not justified unless some other low cost alternative fuel is made available. The main reason for the hike in transportation cost is highly inefficient Pakistan Railways. Transportation of POL products and other goods by trucks is punitive. It is encouraging that two separate pipelines have been constructed for pumping crude oil to PARCO (Pakistan's largest refinery establish as joint venture between the governments of Pakistan and Abu Dhabi. Still large quantities of POL products have to be transported to up country. Reportedly nearly 2000 tankers are dispatched for up country. These tankers also consume huge quantity of imported diesel that erodes country's foreign exchange reserves.
Airlines also play a key role in the transportation of perishable commodities but bulk of the export cargo is being handled by the foreign airlines. Not only fares but airfreight charges have to be raised due to the mounting losses resulting from over employment and mismanagement. It is true that on certain route fares have to be subsidized but this amount should not be collected from other groups, particularly exporters.
It may not be out of context to mention that during mango season some of the airlines operated freighters (cargo carriers) to take the load to various destinations, particularly to Europe. One wonders if foreign airlines can operate special cargo carriers, why can't the national carrier do the same?