ENERGY: THE DRIVER OF GROWTH

PROF. DR. KHAWAJA AMJAD SAEED
(feedback@pgeconomist.com)
May 24 - 30, 20
10

Pakistan is facing many challenges. Poverty alleviation is an active challenge. Gap between haves and have nots is another one. Acceleration of the pace in economic development is the crying need. Promotion of employment in general and that of self-employment is the need of the hour. Quantum jump in production and productivity in all sectors of the economy is a hot agenda. Tackling the issue of high growth concurrent to social justice is the outcry of today. In short, we are desperately in need of tackling problems on several fronts.

ONE WONDERS FROM WHERE TO START?

The answer is to give top priority to energy to start strengthening the base to accept the foregoing challenges and pave the way to achieve glorious success for sharing the economic dividends across the board to ensure all round prosperity in the country for social stability, peace and tranquility in all walks of life.

Economy has three constituents: Agriculture, Manufacturing and Services sectors. Economic success achieved on all the above sectors is attributable to several factors including in particular energy. Therefore, energy can rightly be called driver of growth. Some call it engine of growth.

One theory in economics is that economic development can flourish if the government provides infrastructure. Infrastructure is of four types: intellectual, physical, social and financial. Energy constitutes physical infrastructure. It is generally believed that the tremendous success achieved in Indian Punjab in agricultural sector is attributable to road development and energy supply availability.

All over the world energy has served as catalyst for achieving accelerated socioeconomic development: This belief needs to be indoctrinated in Pakistan on a sense of urgency. In fact we all should receive a wakeup call by undertaking all steps to strengthen the supply side and contain, within our controllable means, demand side so that ample energy is available for the following:

a) Agricultural Sector to ensure a break through in production and productivity.

b) Manufacturing sector to optimise the use of resources to boost production to meet domestic demand and expansion in exports.

c) Services sectors to enable 52 per cent contribution to GDP to strengthen logistics for backward and forward linkages.

The moral of the message is that "Energy be used as an engine of growth".

Accordingly this slogan ought to be translated in reality to achieve a breakthrough in tackling socioeconomic problems facing Pakistan. The democratic setup must accept this challenge on the principle of sense of urgency and show the users that their sense of seriousness is a business which they will address and translate in reality.

Except for IPPs during Benazir's time during mid 1990s, no government took active interest in boosting supply side of energy. Due to social turbulence in Balochistan, gas reserves were not activised. Hydel dams were not built. Thus supply side was ignored. Some announcements were made in 2006 but these lacked genuine implementation.

On the other hand, demand side continued to show an upsurge. Use of electrical appliances continued to increase and the government was forced to announce load shedding sometime called load management. This will continue till such time the supply side shows significant increase.

INSTALLED GENERATION CAPACITY

S NO PARTICULARS   %
1. Wapda   58
    %  
  Hydel 58  
  Thermal 42  
    100  
2. IPPs   30
3. KESC   09
4. Nuclear   03
      100

POWER SUPPLY

Unfortunately hydel generation of electricity was an ignored agenda in the past, although it is the cheapest source of energy----now around Rs1.92 per unit.

Untapped capacity of 58,000 megawatt exists which, if properly addressed, can revolutionise the life in Pakistan to give boost to supply side. The increase in oil prices (from a normal of US$50 to $147 per barrel) gave a big jolt as the lost of generating electricity from oil increased considerably. Innovative thinking of buying from available sources on deferred payment basis in particular from Saudi Arabia and Iran was lacking. Commercial diplomacy was not used as an effective instrument. Unutilised capacity of IPPs was not addressed due to circular debt issue. KESC, after privatisation, never invested money in its expansion. Nuclear energy generation is a difficult issue. Thus supply side constraints and/or neglect were responsible for the gap between demand and supply of energy.

GAS CONSUMPTION IN PAKISTAN

S. NO. PARTICULARS %
1. Power 42
2. Industry 19
3. Fertiliser 16
4. Households 16
5. Others 07
. . 100

CONSUMPTION PATTERN

Generating power from gas is comparatively cheaper rather than using finance oil. Therefore the trend to generate energy from gas has been growing over time as it is cost effective.

Industry in general and fertiliser factories in particular use 35 per cent gas. Currently textile has been exempted from gas quota allocation whereas fertiliser factories will be affected by restricted supply of gas.

ELECTRICITY CONSUMPTION PATTERN

S. NO. PARTICULARS %
1. Households 43
2. Industry 28
3. Agriculture 12
4. Commerce 07
5. Others 10
. .. 100

Unfortunately load shedding has affected household life, slowed down industrial growth (negative growth of 7.0 per cent registered in 2008-09), partially affected agriculture and forced shops to be closed at 8:00 pm.

DEMAND: EXISTING & PROJECTED

S NO PROVINCE EXISTING MW 2024-25
1. Punjab 7,027 29,103
2. Sindh 2,642 10,993
3. Khyber Paktoonkhwa 1,697 7,018
4. Balochistan 494 1,964
. . 11,840 49,078

The policy planners should rise to the occasion and develop a policy framework for implementation to accept the future challenges. The earlier this is done the better.

WAY FORWARD

Some steps have been announced by the government of Pakistan in the short run and some in the long run. We need to fight on all fronts. Some suggestions are offered below:

SUPPLY SIDE

1. Gas exploration be accelerated. All social hitches be negotiated and legal hurdles be properly and promptly tackled.

2. Hydel unutilised capacity of 58,000 MW be tapped with a practical program.

3. Circular debt problem be solved on urgent basis to enable full utilisation of existing generation of electricity of IPPs.

4. All provinces should allocate substantial amounts for construction of smaller hydel dams for generating electricity to meet local needs.

5. Friendly countries be approached to have access to instant availability of electricity near Karachi Airport. Turkey has provided the lead.

6. Electricity generation from coal, wind, solar and other non-traditional sources be addressed immediately.

DEMAND SIDE

1. Public should use energy appropriately.

2. Wastages be avoided to conserve electricity.

3. Line losses must be minimised to enable big supply of electricity to meet the growing demand.

4. Cooperation be extended to implement the demand management plan of the government.

The author is Professor Emeritus and Founder Principal of Hailey College of Banking & Finance, University of the Punjab, Lahore.