ENERGY CRISIS AFFECTING EXPORTS
Research Analyst, PAGE
May 24 - 30, 2010
No country can achieve high economic growth without producing sufficient energy to meet its national energy demand. Enough energy production means flourishing industries, good agriculture outputs, and better infrastructure.
Electricity load shedding in Pakistan is alarming. When energy supply of an industry is restricted, its output decreases and cost of production increases due to which many industries shut down triggering unemployment. The upsurge of inflation is due to energy shortage in Pakistan. Number of people living below poverty line is increasing due to unemployment and inflation, both of which are byproducts of energy crisis.
The exports from Pakistan are continuously declining. The trade deficit is increasing which eventually will result in unstable economy. Like industry, agriculture is heavily dependant on electricity and oil. Pakistan's crop production has failed to achieve its target and this failure led to the creation of another crisis, which is 'Flour Crisis'. Increase in the prices, and availability of oil and natural gas directly affects transport. Expensive commercial transport further increases cost of a product which decreases 'purchasing capacity' of people, which means depreciation of national currency.
BALANCE OF TRADE (MILLION US $)
Pakistan has been facing an unprecedented energy crisis since the last few years. The problem becomes more severe during summers. During the peak crisis there was a power outage of 3-4 hours every day. Those without generators and UPS face tremendous problems. The prices of both continue to increase due to a sharp increase in their demand.
The Pakistani government is anticipating the energy crisis to worsen in the coming two years due to a 50 per cent increase in the demand and a rather slow improvement in the supply. The power shortage is estimated at about 5300 MW by the end of 2010. The overall energy requirement of Pakistan is expected to be about 80 million tons of oil equivalents (MTOE) in 2010.
A major shortfall is expected in natural gas supplies, as an official energy demand forecast indicates that the demand for natural gas, which makes up about 50 per cent of Pakistan's energy consumption, would increase by 44 per cent to 39 MTOE from 27 MTOE currently.
The government has planned five major initiatives, including three gas import pipelines, the Gwadar port as energy hub and the LNG import to meet these energy requirements.
REASONS OF ENERGY CRISES
Main reason for energy crisis is lack of visionary leadership in Pakistan. Government should have developed such policies or projects which could benefit Pakistan for decades such as construction of dams, ports, motorways. Mega dams were built about 40 years ago and they are still crucial for Pakistan.
Coal reserves were discovered in 1995 but not utilized since 15 years. Cheapest energy can only be produced by dams which would take 7-8 years to complete. Mega project to produce electricity from coal would also take 5-6 years to complete. However wind and solar energies can be generated in lesser time but they are expensive.
The policy makers of Pakistan have so far failed to understand one thing. They do talk about making dams and setting up nuclear power plants but why do they not understand the importance and benefits of alternate energy sources such as solar, windmill energy etc. They are cheap and quick methods for producing electricity.
Pakistan is a blessed with energy resources. Solar energy is available in most cities all year round similarly wind energy is readily available in the coastal areas. These energy sources if tapped can be of great help in reducing the current demand supply gap.
Some experts argue that the world is heading towards a global energy crisis due to a decline in the availability of crude oil and recommend a less dependency on fossil fuel. This has led to increasing interest in alternate power/fuel research such as fuel cell technology, hydrogen fuel, biomethanol, biodiesel, Karrick process, solar energy, tidal energy and wind energy. To date, only hydroelectricity and nuclear power have been significant alternatives to fossil fuel, with big ecological problems (residues and water spending). Hydrogen gas is currently produced at a net energy loss from natural gas, which is also experiencing declining production in North America and elsewhere. When not produced from natural gas, hydrogen still needs another source of energy to create it, also at a loss during the process. This has led to hydrogen being regarded as a carrier of energy rather than a source.
With dependency on imported energy and food, Pakistan will always face foreign exchange crisis. Pakistan's excessive reliance on foreign loans and donor aid has mostly resulted from the need to finance the high current account deficits.
No doubt, Pakistan urgently needs an out of the box strategy to accelerate the export growth and avoid energy crisis.