TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
July 28 - Aug 03, 2008

The widening trade deficit poses a formidable challenge to economic growth of Pakistan that will keep under the shadow of recession until alternative sources of energy fructify and exportable products diversify on the war-path.

In the country last fiscal year aggregate exports were estimated at $19.2 billion in a wide contrast to $39.9 billion imports. The stark difference was mainly topped with $11.4 billion petroleum products import bill, second to none in the entire list of import. Petroleum products worth of $6.2 billion and crude of $5.2 billion scored this superlative position and rendered almost a cent percent outflow setback to foreign exchange of the country.

Often slight compensation puts forward by revenue earned through exports of petroleum products from the country, but benefits to this effect do not seem to be passed on to public. In fact the revenue is too paltry to supersede net importing value of petroleum products, whereas national produce submerges in exported petroleum group in the form of solid coal. Only in last fiscal year, 1.7 million metric tons of Naptha worth $1.2 billion and 428 metric tons of coal worth $62,000 were exported from the country.


The energy demand graph in Pakistan is depicting an upward trend year on year, making the need to save foreign reserves from annual trimming highly important since imported petroleum products remain the main source of generating energy in the nation. While 17 million metric tons of petroleum products were imported in fiscal 2006-07, it recorded rise by 2 million metric tons to 19 million metric tons in the following fiscal. Of course, this figure did not include locally produced crude, which adds roughly 40% in domestic oil refining capacity. Given the collective volume of petroleum required in the country for meeting comprehensive energy needs per annum, it is safe to presume that stoppage in major international supply on account of, for instance, liquidity crunch would render extreme power deficiency nationwide. Unless other alternative is worked out, this presumption is more true than false.

Having endowed with favourable numbers of natural resources to substitute present principal source of energy, Pakistan can become self sufficient in meeting national energy needs in matter of years. For example, in spacious windy terrain across the country mega watts of electricity-premier energy for both household and industries- can be produced through wind turbines. In addition to this, there is potential coal reserves of 185 billion tons out of that estimated 175 is embedded only in Thar. The exploration activity jointly carried out by United States Geological Survey and Geological Survey of Pakistan has already approved more than 15 billion tons of coal reserves. Thar coal reserves comprise of basic form of coal, which is known as lignite. One ton of such coal has a capacity to produce 2 barrel crude oil and in terms of oil value the reserves are far huge than crude of Saudi Arabia and Kuwait. These countries have crude oil reserves of around 235 billion and 105 billion barrels respectively.

Sindh government had received warm responses to its bid for investment in coal mining and coal power producing at Thar. A coal fuelling plant was required to generate 1,000 MW of electricity. The province has been studying the project since long. Unfortunately, fate of the project deems to be cursed by politics. The debate simmered on the name of the project and ownership of it. That whether it be named Sindh Coal Authority or whatever was the confluence of altercation, nothing would emerge out of which except prolonged public sufferings owing to deadlock, which calls up paranoia about its origin.

No alternative source of energy has ever been realized full-fledged because of the pressure group's tactics to put stymie in the progress. The pressure wants to establish monopoly of a group in the market. In this relation, the circle of doubt engulfs oil marketing companies since they have market shares under direct attack of operational alternative energy. It is also feared that by controlling operation of coal mining in Thar federal government would deprive the province of its deserving windfalls from the project.

Because of long term implications of coal on source of energy and foreign exchange, coal can not stem immediate substitute to crude as it would take three to five year uninterrupted working for substitution. In short term, however, gas can become effective substitute.

Governments of Iran, Pakistan, and India embarked jointly on $ 7.6 billion gas transportation project, in which Iran-having world's biggest gas field-principally agreed to supply 2.2 billion cubic feet daily half each to Pakistan and India. Yet this project could also not hit the final round mainly because of US animosity against Iran. According to an estimate, by 2010 Pakistan will be in need of at least ten million cubic metres of gas to meet the needs of the existing industries due to the depletion of Sui field in Balochistan. But, other fields have still undiscovered potentials of hydrocarbon. For example, in Tando Allahyar, Sindh recently initial discovery found a per day quantity of gas at 11 million cubic feet and condensate at 200 barrels.

Among reverberated four gas transportation projects in the interest of Pakistan IPI has relative adequacy in term of financial deliverability and reliability. Large capacity pipeline from Iran would curtail the cost of transportation for Pakistan due to the geographical proximity. Conversely, trans-Afghanistan pipeline from Turkmenistan to Pakistan through Afghanistan or from Turkmenistan to Pakistan to India through Afghanistan would cut down royalty of around billion dollars, which would be bagged by Pakistan in case of IPI for channelling gas into India. Proposed deal on trans Iran gas supply from Turkmenistan to Pakistan through Iran has also not been finalized.

However, Indian Oil Minister, Murli Deora is quoted by a news agency as saying "India expects to finalise a deal by August to transport gas from Iran via Pakistan". It is high time that gas deal or deals be signed in accordance with mutual interests of signatories involved instead of under external pressure, for Pakistan the soon cheap energy available, the good to economic well being.

Government of Pakistan can shorten the gap of trade deficit too by focus on expanding varieties in exportable products and parallel attention shift to other industries as similar to textile industry for building up foreign exchange. The harm does not lie in the sole ability of textile in topping foreign exchange, but, indeed economic growth will catch the torrid pace following the consolidated and participative contributions of all sectors. In this regard, export diversification may prove itself a positive measure to revive economic progress and it can only be possible through resilience of domestic trade and industry. At the fag end of current fiscal year, there is burning an apprehension that if the heavy load of oil import bill on balance of trade does not loosen, the economy would not burrow through the state of depression.