Energy is the main source of development and without
proper management; Pakistan's growth is becoming stagnant. Energy prices
are highly correlated to the economy growth rate and higher rate always
severely leads to stagnation of the industry, raising the cost of
production, subsequently leads to increase in the prices of finished
goods. As a result in the local market, consumers have to bear it and in
the international market price competitiveness dampens exports. Commerce
Minister Abdul Razak Dawood has said that electricity and gas rates in
Pakistan are high, which pose a challenge to make the industry
internationally competitive. "I want to make the local industry
internationally competitive, but utilities' cost is high and a challenge
for us," he added.
The energy sector consists of petroleum products,
gas, electricity, and coal. During decade of 1990s, average consumption
of the petroleum products showed upward trend. On average, it increased
by 6 per cent per annum. The consumption of gas increased by 2.7 per
cent per annum. Similarly, the consumption of electricity increased by
4.8 per cent. However the consumption of coal, which showed wide
fluctuation recorded an annual growth of 0.9 per cent only.
Governments used it as the most handy and direct tool
to generate revenues by increasing the prices of the oil, electricity
and now even the natural gas. Actually due to decades long borrowings
from these institutions, Pakistan in the situation borrows more to pay
cost of these loans. So, whenever Pakistan looks around debt facility
from these institutions they always demand surety and security for
payback and also always compel rise in energy sector prices.
Power prices' rise is affecting agriculture, which is
the backbone of our economy and feeding around 70 per cent of the
population. The electricity and diesel rate are continuously rising and
has touched alarming levels and now needs to be controlled. These
persistent hikes are leading towards destruction.
On average, the household sector has been the largest
consumer of electricity, accounting for 40.3 per cent of total
electricity consumption followed by industry 31.5 per cent, agriculture
14.8 per cent, commercial 5.4 per cent and other government sector 7.6
per cent. The main target market for the electricity is the rural area
where almost 70 per cent population resides. The number of villages
electrified has increased to 70,819 by February 2002.
Overnight, Government hiked electricity rates for
WAPDA consumers by 12 per cent or 27 paisa per unit. Initially President
Musharraf perched the increase. The most recent hike in the electricity
prices seems well planned as initially NEPRA demanded a rise more than
requirement and later on revised down the rise yet leaving burden on the
Meanwhile, it seems that government is well aware of
electricity needs in different regions and to cover the shortage of
electricity in Azad Jammu & Kashmir the government is encouraging
the foreign investment and promoting hydel generation of electricity.
Another ingredient of the energy sector is oil and
petroleum and hikes in its prices is also stagnating the country's
growth. Pakistan's economy is highly vulnerable to sudden surge in
petroleum prices as Pakistan meets its requirements through imports. The
petroleum imports comprises of almost 15 per cent of imports, which is
very significant. This is a major drain of country's foreign exchange
reserves and has been causing serious balance of payment difficulties.
New price mechanism has been introduced and sub-committee of the Oil
Companies Advisory Committee meets biweekly and revises oil and
petroleum prices. And now adjustments in oil prices are directly related
to fluctuations on oil prices in international market. But still local
oil prices are inflated and are one of the biggest sources of revenue
for government but at the same time also source of inflation.
The Federal government surprisingly increased the
petroleum prices by 13 per cent on January 01, 2002, in addition to
development charges, to generate more revenues. And, most recently, the
prices of oil products rose by as much as 3 per cent, barring high-speed
diesel which recorded a drop of 1.4 per cent on 1st of August.
The impact on developing countries would likely be at
least as large as for many of the industrial countries. When the oil
export countries are making money at the same time net oil importing
countries like Pakistan are facing a significant adverse impact on the
economy. So, here would like to highlight that persistent hikes in oil
prices either by internal or external factors is alarming for the
Pakistan's energy sector still has room to improve
and International Financial Institutions are lending for restructuring
the sector. In this regard Asian Development Bank lent Pakistan US$300
million in year 2000 and agreed to lend US$200-250 million in 2003.
ADB's total lending is worth US$2.9 billion in last 30 years out of
which US$2.3 for power sub-sector and US$0.6 to the natural gas and
Meanwhile, the sectoral consumption of gas shows the
consumption of gas during the first nine months of FY 2001-02 is rising.
The Power sector comes with higher consumption of 29 per cent, followed
by households 7.2 per cent, fertilizer 6.5 per cent, and industry 12 per
cent, mainly due to conversion of power plants into gas and most of the
gas supplies are fulfilled by main gas fields; namely, Zamzama and Miano.
The price hike mechanism, recently, grasped gas
sector where the Oil and Gas Regulatory Authority (OGRA) increased
prices of Sui Southern Pipe Line by 6.5 per cent of Rs 7.13 per million
Additionally government is encouraging other source
such as; Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG).
Currently 22 companies are marketing the indigenous and imported LPG. At
the same time government is promoting usage of CNG in automobiles that
ultimately will reduce dependence on petroleum.
Now coming towards the most sophisticated, delicate
and complex source of energy means nuclear power. It is the most
expensive and complicated source to generate the energy but luckily
Pakistan has both resources and capability in this field. Pakistan is
generating 137 MW nuclear power in Karachi Nuclear Power Plant since
1971. Another Nuclear Plant, Chashma Nuclear Power Plant generated 1415
million KWH during the period of July-March 2001-02. Now Pakistan should
chalk out plan to generate nuclear power. This is one area where
research and development will show breakthrough.
After having a look at the energy sector we can say
Pakistan governments are playing the role of intermediaries between
International Financial Institutions and the poor people of Pakistan
where the poverty is below the standards, established by these
institutions. So persistent hikes in energy prices is making the
Pakistani exports uncompetitive that is avoiding poverty alleviation and
unemployment in the country. The blind implementation of bureaucratic
policies of International Financial Institutions in the energy sector to
make these sectors profitable is alleviating poverty and in the real
terms dragging down the living standards. At the end better economic
management and well managed natural resources can help us to overcome
energy prices hike problem.