GROWING AUTO DEMAND PUTTING PRESSURE ON ENERGY RESOURCES
June 27 - July 3, 2011
Pakistan Economic Survey 2010-11 highlights indicate that the Large Scale Manufacturing Sector (LSM) recorded a nominal growth of 1.71 percent during the first nine months of the current financial year. Our auto industry, during the same period recorded an overall growth of 14.6 percent: cars 16.4 percent, jeeps and light commercial vehicles 20.5 percent, and two and three wheelers 12.6 percent.
The auto sector growth pattern, an obvious mismatch with the industry growth, ensues from two dominant economic factors: luxury-based spending on autos by the haves of the society and need-based spending on personal transport by the masses who have lost their faith in government capacity to provide them a decent, economical and efficient transport system. The need-based spending, in most of the cases, has been financed by the cuts in food, clothing and shelter spending as transport has assumed the most import position in low-income groups' budget programs. Reaching the place of work or duty on an ongoing basis is obviously more important than the luxury of a square meal.
PRODUCTION (P) AND SALES (S) OF VEHICLES
VEHICLE LAST 15 YEARS 15-YEAR AVERAGE FY-10 JUL-DEC FY-10 JUL-DEC FY-11 JAN-MAY 2011 JUL-MAY FY-11 Cars P 1292609 86174 121647 53974 62952 60329 123281 S 1181899 78793 123957 53565 59646 61,809 121455 Trucks P 39272 2618 3425 1493 1432 1082 2514 S 31894 2126 3620 1498 1384 1076 2460 Buses P 15209 1014 628 320 242 203 445 S 13614 908 657 289 243 242 485 Jeeps/LCVs P 17957 1197 1172 519 504 327 831 S 14435 962 1201 472 381 328 709 Pick-ups P 155682 10379 15768 7455 8961 8404 17365 S 143458 9564 16496 7479 8072 8743 16815 Farm Tractors P 540319 36021 71607 34027 32719 31573 64292 S 499967 33331 71512 33609 32743 29508 62251 Motor Cycles & 3-wheelers P 4392355 292824 736861 350286 389477 370961 760438
The growing number of cars and two wheelers has put tremendous pressure on our meager energy resources. The off and on petrol and gas shortages and sale-point shutdowns foreshadow the energy-related economic crisis, which we may not be able to overcome. While the developed world has swiftly toned down the intensity of oil use in the wake of rising oil prices and uncertain crude production, the developing economies lag far behind on this account owing to their proneness to wasteful oil consumption. Alan Greenspan writes in his book The Age of Turbulence: "In the United States, between 1945 and 1973, consumption of petroleum products had risen at a startling average annual rate of 4.5 percent, well in excess of the growth of our real GDP. In contrast, between 1973 and 2006, US consumption grew, on average, by only 0.5 percent per year, far short of the rise in real GDP. In consequence, the ratio of U.S oil consumption to GDP fell by half. The ratio of intensity of use since 1973 also fell by half in the euro area, and by even more than half in Britain and Japan, where intensity is currently below that of the United States. By comparison, oil use in the developing world is too often wasteful."
Pakistan, being a potential but mismanaged economy, is threatened by the depletion of its gas reserves and underutilization of alternative energy resources, mainly coal and hydro. The global oil politics has made dependence on oil a highly risky proposition. The lack of investment in production facilities, the fear of price fall in case of increased production, and control of aboveground oil inventories by the investors and speculators has forced the developed economies to reduce their 'addiction' to oil. Their technological advancement and industrial development present them with a number of options. For example, in addition to using ethanol as an alternative fuel, the US auto industry has come up with the 'plug-in hybrid' solution. It is producing cars and vehicles that can be driven either by petrol or by electric. While ethanol, produced by the use of corn, may not be a viable option even for the US - according to Alan Greenspan 'if all corn were devoted to ethanol, our pigs would starve' - developing poor economies like Pakistan certainly cannot consider this option on a large scale as the sufferers in our case would be the human beings, not the livestock alone.
Plug-in hybrid option is out of question in our case for two obvious reasons: the dismal state of our technological advancement and the already-existing power crisis. The last decade saw a marked reduction in the intensity of oil use as private transport in Pakistan underwent a shift from oil to gas use. It was the time when Pakistan's economy was given a free hand to grow - and grow it did to the surprise of many. Low-rate, easily available credit brought about a social transformation and the teeming middle class acquired personal transport assets giving a tremendous boost to the auto industry.
Unfortunately, the growth proved unbalanced as a matching infrastructure development to accommodate unusually high number of auto vehicles did not take place. Moreover, the waste factor surfaced as a failed government transport policy induced an overuse of personal transport system. In developed societies, the use of personal transport is kept to a minimum with the help of a mass transit system. A proper infrastructure that is well-made roads, modern railway tracks, highways etc. coupled with an efficiently-run mass transit system afford a cheaper mode of transport to the masses on one hand and economize on country's energy consumption on the other. The change also put pressure on country's gas reserves that are now touching a precarious level.
We never lacked in energy resources; we just failed to harness them. The recent disclosure in the parliament by Dr. Asim, advisor to the prime minister on petroleum and natural resources, about the new gas reserves found in Balauchistan strengthens the view that our energy future is not as bleak as painted by some. We need to put our act together to manage and benefit from our natural resource wealth. The auto industry will keep on growing with the growth in population. To manage our vehicular economics, we will have to put in a matching performance in our infrastructure and energy sectors. Any further imbalance among auto, infrastructure and energy sector growths will lead us to an unmanageable economic and social chaos.