brm zahid faizan

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Business Research Methods

Submitted ToSir Rasheed

Submitted By

M.Zahid Iqbal10645

Fazan Raza

10646

M.B.A 3rd (EVENING)


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Acknowledgement

Thanks to the ALMIGHTY ALLAH, the merciful most

beneficial, for everything He has given us & all that has not.

First of all we are thankful to our honorable Sir Rasheed forgiving us chance to improve our skills by making research onthe topic energy crises impact on industrial sector. This willdefinitely help us building our talent, skills and for betteropportunities.

We pay thanks to every person who helped us in the

research to complete the topic on energy crises impact onindustrial sector, specially our friends, and respectedteachers because with out there appreciation and help theresearch on this topic cannot be completed.

Last but not the least our beloved PARENTS.


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Preface

In this report we are trying to give a important Informationfor our topic energy crises impact on industrial sector. We have doneour level best to make our readers aware about this topic. To makethem able to imagine what is the importance of this topic.

We have described firstly the introduction on energycrises in Pakistan, Strategies of energy crises, define the actualproblems, impact on imports and exports of our country due to theenergy crises, economic review and variables of energy crises and in

last give the solution to solve the energy crises in Pakistan. We givethe energy crises and the industrial out puts.


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Table of Contents

Executive summery Introduction Types of energy Growth Growth performance of components Variable of energy crises

Growing Economy, Growing Energy Needs Pakistan Trade, Exports and Imports Pakistan Exports Commodities Pakistan Exports Partners

Foreign exchangeExternal financing

Banking sector Circular debt Stock market Inflations

Economic business sector impact Impact on textile industry Social Sector Impacts Poverty and unemployment Future and alternative sources of energy

Alternate energy technologyPakistan's energy crisis: short and long-term solutions

State of energy resources

The reason behind the crisis Energy conservation measures Measures by the government Conclusion References
http://www.opfblog.com/1499/pakistans-energy-crisis-short-and-long-term-solutions/http://www.opfblog.com/1499/pakistans-energy-crisis-short-and-long-term-solutions/


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Executive summeryIn this report our main focus is on energy crises and its impactson economy of Pakistan. We are making this report for studypurpose. In making this report we use secondary data.

IntroductionEnergy crises is one of the most important and highly growingproblem is Pakistan. In this report our main focus is on the energycrises and its impacts on Pakistans economy.Recent rise in energyprices, shrinking existing resources, and the search forAlternative sources of energy and energy conservation technologieshave brought intoFocus the issue of causality between energy use and economicgrowth.economic growth may affect the demand for energy

Significantly.The country may face energy crisis by the year 2007 following healthygrowth of 13 per cent in electricity demand during the last quarter,which will erode surplus production in absence of commissioning ofany new power generation project during this financial year.As per Pakistan Economic Survey 2003-04, electricity consumptionhas increased by 8.6 per cent during first three-quarter of last fiscalyear. However, a top level WAPDA official maintained that electricitydemand surged up to 13 per cent during last quarter.Chairman WAPDA Tariq Hamid at a Press conference early this year

warned about the possible energy crisis and stressed the need forquantum jump in power generation. The experts say it could only bepossible through a mega project of hydropower generation; otherwisethe gap between firm supply and peak demand will remain on the rise.

Types of Energy

ElectricityNatural Gas

OilHydroCoalNuclear


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Electricity

Pakistan produces about 19,500 MW of electric power.

There is currently load shedding of up to 700 MW a day.

Electricity demand is expected to grow by eight per cent a year duringthe period 2005 2015.

An annual installation capacity of about 2000 MW is required for thenext 10 years.

Pakistan can overcome the energy crises by increasing thegeneration of electricity from different ways.

Natural Gas

Pakistans gas reserves are 32.8 TCF at present.

Annual production at present is about 1.16 TCF.

A demand gap of about four per cent of the total demand, is expectedin 2010.

Gas supply would fall from 32.6 MTOE in 2010 to 20.7 MTOE in 2025.

Demand is expected to grow continuously, quadrupling in 2025.

Pakistan can overcome the energy crises by increasing the byincreasing the utilization of the Natural gas.


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Oil

All predictions now failing and the oil prices are rising and now aboutto reach 100 level. Who knows that in market trading if even thecustomers are buying the oil on +100 $. The reason being given forthis enormous rise is the US oil reserves are depleting and thereforecustomers are ready to purchase the oil at any price available. Thefuture prospects also not encouraging. All trading is being made on+90 $. OPEC promised to raise its out put but with out any IPRI Factfile 16 significant effects. For the time being the prices were dippedbut raised again on much higher values. The winter is just arriving and

nobody knows that these prices will settle at what level. Rising tensionbetween US and Iran is one reason. Some sources are predicting theattack on Iran is imminent. If the condition continues like this who isgoing to benefited. Emerging economies and developing will suffermost. Their economy is dependent on energy resources. How cansurvive and how can they meet their production commitments. Inrecent months oil surged from 70$ to 92$ and still rising. Thoseindustries which consume more energy will suffer with maximum. Itwill lead to rise of inflation shutting down in efficient industries andrising unemployment in third world countries. When come to individualthe poor will suffer most .High income group will survive and it will noteffect on their livings. But the strains coming on poor in third worldcountries will transform to social unrest and hence will causeinstability in the region.

Pakistan economy is already under intense pressure. On one hand ithas the competitors like China and India giving cut throat fight.Another end it has continuous problem on its western bordersdraining its resources and causing political chaos.

Pakistan exports and its all economic activities are dependent ofuninterrupted energy supplies for its energy requirement maximumshare still of furnace which is imported from Middle East countries.Rising prices will bring a wave of inflation.


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Already many textile mills closed down due to higher production costswhich make it uneconomical further increase in oil prices will definitelybring more strain on existing working units. Firstly Governmentabsorbs the fuel bills, now this time Govt. increase the prices whichdirectly affect on the poor people of Pakistan.

Today only there are news that Pakistan is going ahead 2000 MWpower plant based on furnace oil. Now we have to look for the futureand sustainable economic activity.

Development of Renewable energy resources is not moving aheadbeyond symposiums and conferences or in other crude words lipservices. Pakistan's future as economic leader in the region is atstake if sustainable cheap energy resources are not developed on

priority. Energy Crisis in Pakistan will increase, so the solution is notso simple for the energy crises in Pakistan. The hurdles should beidentified and removed on priority.

One area which we want to emphasize is the conservation of energy.We have to persuade all concerned that all possible measures to betaken to save energy so it can be used for future.

Energy efficient plants and machines are the recipe for our survival.

Oil import bill amounted to about $3.5 billion in 2004-05.

Last years oil import bill amounted to about $6.5 billion.

Oil prices burden expected to be even higher in future.

Pakistan can overcome the energy crises by increasing the byincreasing the utilization of the Oil of Pakistan.


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Wind Energy

Pakistan is facing acute shortage of energy. with 7% increase of its

economy this short fall soon to slow down its economic growth andwill shatter its dream to become one day a developed country.

Most of its energy demand is being met with either Hydro power orthermal units. Pakistan is spending a very large amount of foreignexchange to purchase the furnace. The gas reserves already startdepleting and oil markets are sky rocketing. To overcome thisshortage Government take a initiative to investigate Alternate energyresources in Pakistan developed Alternate Energy Board AEDB. TheBoard is headed by Ret Air Marshal Shahid Hamid. Identified 50,000

MW energy potential from wind resource

Pakistan is blessed with a large resource of wind corridor. AlthoughPakistan meteorological Department was gathering wind data forquite long time but recently United States provided wind energy mapfor Pakistan which confirms a strong wind corridor in Sind coastalarea.

AEDB issued about 80 LOI to the investors List of LOI holders todevelop 50 MW wind farms. Out of which 15 are already issued theland and feasibility reports and financial closings are in progress.

The following is a brief road map for developing a wind form

1. Submission of proposal by sponsor2. Review of proposal by AEDB3. Posting of Bank Guarantee4. Issuance of letter of intent (LOI)5. Feasibility study

6. Generation License7. Tariff Determination8. Submission of Performance Guarantee9. Tariff determination by NEPRA10. Submission of performance guarantee11. Issuance of Letter of support


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HYDEL ENERGY

Water flowing in the rivers has kinetic energy. Once they are used todrive the turbine and produce electricity the power generated as

Hydel Energy.Power produced by the turbines depends on quantity of water

flowing/minute and the head of water available.Mostly river flows by melting glaciers on high mountains. Once

the water start flowing in the valleys it changes its head very rapidly.This energy can be converted into electrical energy.

Two methods are normally used:-1. Dams2. Run of River projects.

In case of Dams the water flow is restricted by making a hugestorage device and the head of water is increased, the water then isallowed to flow by means of gates and pass through the turbines, thehead of reservoir level is maintained to provide uniform power, andthe water stored in peak season additionally is used for irrigationpurposes in dry seasons.

In run of river projects the water is diverted through the tunnelsand once it gains the head allowed to fall and pass through the

turbines and back to river. the water in these projects is continuouslyflowing and not being stored.

Geographical situation is paramount importance in choosing asuitable site for the hydro project and it evolves a very serious timeand money consuming study.

Once a site is located further detailed feasibility study isrequired before proceeding any serious effort to start the work.

The feasibility study should include following field work.

1. Detailed Mapping of the area2. Topographic study of the area3. Seismic refraction study4. River flow data5. Weather data containing, Temperatures, pressures, rainhumidity


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6. Water sampling and testing7. Environmental study8. Social impact9. Wild life and fish study10. Identification of stake holders of the area11. Coring and getting samples of the soil at 50-200 metersdepth12. Laboratory testing of the cores samples13. Tectonic study to evaluate earth quake dangers

COAL ENERGY

if all The oil Reserves of Saudia Arab & Iran Put TogetherThese Are Approximately 375 Billion Barrels, But A Single Thar CoalReserve Of Sindh is about 850 Trillion Cubic Feet, Which is MoreThan Oil Reserves Of Saudia & Iran.

These reserves estimated at 850 trillion cubic feet (TCF) of gas, about30 times higher than Pakistan's proven gas reserves of 28 TCF.

Dr Murtaza Mughal president of Pakistan Economy Watch in a

statement said that these reserves of coal worth USD 25 trillion cannot only cater the electricity requirements of the country for next 100years but also save almost four billion dollars in staggering oil importbill.

Just 2% usage of Thar Coal Can Produce 20,000 Mega Watts ofElectricity for next 40Years,without any single Second of LoadShedding and if the whole reserves are utilized, then it could easily beimagined how much energy could be generated.

The coal power generation would cost Pakistan PKR 5.67 per unitwhile power generated by Independent Power Projects cost PKR9.27/-

It Requires Just Initial 420 Billion Rupees Initial Investment,Whereas Pakistan Receives annually 1220 Billion from Tax Only


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Chinese and other companies had not only carried out surveys andfeasibilities of this project but also offered 100 percent investment inlast 7 to 8 years but the Petroleum Gang always discouraged themin a very systematic way

But Petroleum lobby is very strong in Pakistan and they are againstany other means of power generation except for the imported oil. Thislobby is major beneficiary of the increasing oil bill that is estimatedabove 15 billion dollar this year. Even GOV. is planning to Sell allthese reserve to a company on a very low price.When Pervaz Musharaf was president he gave green signal toembark upon the initiation of work on exploiting energy potential of

these coal reserves of Thar under a modern strategy.

Growth

The growth in manufacturing sector of Pakistan had been steadilydeclining for the last three years, as it is fell to 8.48 percent in 2007-08 from 8.8 percent in 2006-07 and 19 .9 percent in 2004-05 (Source:Economic Survey of Pakistan). The falling trend in the industrialoutput is mainly due to capacity constraint and shutdown of manyindustrial units, because of high cost of doing business. World Bank

(February 2008) points out in the report that Pakistan suffers from thelack of infrastructure facilities in the water, irrigation, power andtransport sectors. In the energy sector, the country will face severshortage of around 6000 megawatt by 2010. Similarly inefficiencies intransport sector cost the economy between 4-5 percent of GDP eachyear. The major reason of current slowdown in manufacturing outputis said to be frequent power outages due to low electricity production.The ongoing energy shortages caused by an ageing energyinfrastructure, chronic under investment in expansion and

maintenance and unsustainable pricing regimes slow industrialoutput. Apart from infrastructure and capacity constraint issuesmanufacturing sector would further slow down in the days to comebecause of fast depreciating value of rupee against dollar, whichwould made imported raw material more costly.


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Energy is the most problematic issue in the world. Demand of energyfrom the emerging markets like China and India growing day by day.Pakistan with small manufacturing market surrounded by majoremerging markets like China, India, Malaysia, Indonesia, Philippinesand Bangladesh, will be worst effected by rise in energy prices.Pakistan with official figures of 8 percent growth rate will have adefinite rise on demand of energy for minimum 3 percent. As a rule ofthumb modern day manufacturing industries utilize at least 33 percentproduction cost in terms of energy prices. Any increase in energy costwill effect the production cost and force the manufacturers that eitherto reduce the labor cost or to remain competitive in market byimproving the quality standards. Major giants like China and India willsustain with this situation but smaller economies like Pakistan willsuffer badly.

All predictions now failing as the oil prices reached its maximum everat around $150 per barrel. The reason has been given for thisenormous rise is the US oil reserves are depleting and thereforecustomers are ready to purchase the oil at any price available. In USAthe Gulf of Mexico is famous for oil producing and refining facilities.The prosperity of Houston is only due to oil industry being flourished.However the weather is not so kind in this area and hurricanes andtornados commonly hit the southern part of USA and Caribbean.Volatility of oil market is such, that just news of one hurricanedeveloping in Caribbean shoots the oil prices in the world. A fewyears before oil was being trade on $20 per barrel and no body everthought that the weather conditions in the Gulf can effect the oilmarket. The future prospects are not very encouraging. Emerging anddeveloping economies like Pakistan will suffer most. Those industrieswhich consume more energy will suffer with maximum. It will lead torise of inflation, shutting down industries and rising unemployment inthe third world countries.

Pakistans economy is already under intense pressure due to thecompetitors like China and India giving cut throat flight, at the otherend it has continuous problem on its western boarders draining itsresources. Pakistan exports and all its economic activities aredependent on uninterrupted energy supplies. For its energyrequirement, maximum share is still of furnace, which imported fromMiddle East countries. Already many industrial units closed down due


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to higher production costs which make it uneconomical. Furtherincrease in oil prices will defiantly bring more strain on existingworking units.

On famous oil embargo days a lot of research in Europe was carriedout to find the alternate source of energy. The findings are availableeven in college books. However with the drop of oil prices suchalternatives were uneconomical and therefore shelved. This is thetime that Pakistan now asses very carefully that in case of rising oilprices what actions it should take to conserve energy and to find thealternate source of energy. A volunteer option for all energy users isto conserve energy, to make the plants more efficient and to see thateach drop of energy is saved. If we make serious study on this

subject then we may achieve up to 20% saving in energy, hencesaving in our production cost and making our products more attractivein international market. Of course the energy conservation programscost money. However the investment will be rewarding and will bebeneficial in long terms.

Pakistans thermal units are day by day become aging, reducing theiroutput power. A liberal and progressive policy with less bureaucraticapproach towards energy producing units will help and bring attractive

investment in power sector. Water conservation projects focusing onthe paving of water courses to prevent 40 percent of irrigation waterthat is lost due to seepage have also become imperative. Coal-basedpower generation may be one option given the country's huge coaldeposits in Southern Sindh Province. Development of renewableenergy resources is not moving ahead beyond symposiums andconferences. Pakistans industrial sector is at stake if sustainablecheap energy resources are not developed on priority. Energyefficient plants and machines are the recipe for our survival.


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Growth Performance of Components of Gross National Product

Despite severe challenges, the economy has shown resilience in theoutgoing year. Growth in Gross Domestic Product (GDP) for 200910,

on an inflationadjusted basis, has been recorded at a provisional

4.1%. This compares with GDP growth of 1.2% (revised) in theprevious year. For the outgoing year, the Agriculture sector grew anestimated 2%, against a target of 3.8%, and Economic Survey 2009 10 previous years growth rate of 4%. While the Crops subsectordeclined 0.4% over the previous year,

Livestock posted a healthy rise of 4.1%. The performance of theAgriculture sector was boosted by the weakening of the El Nino

phenomenon, after late winter rains. Industrial output expanded by4.9%, with Large Scale Manufacturing (LSM) posting a 4.4% rate ofgrowth. The Services sector grew 4.6%, as compared to 1.6% in200809. Overall, the CommodityProducing Sectors are estimated tohave expanded at a 3.6% pace, which represents a significantturnaround from the anaemic growth rates of the previous two fiscalyears.

Variables for Energy Crises

Growing Economy, Growing Energy Needs

Pakistans economy is performing at a very high note with GDPgrowing at an exceptional rate, touching 8.35% in 2004-05.

This year official expectations are that GDP growth rate will be around6.5 7.0%.

For the coming years, the government is targeting GDP growth rateabove 6%.


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Growing Economy, Growing EnergyNeeds

With economy growing at such a pace, the energy requirements arelikely to increase with a similar rate.

Pakistans energy requirement by 2015 is likely to cross 120MTOE.

By 2030, the nations requirement will be 7 times the currentrequirement reaching 361MTOE

Pakistan Trade, Exports and Imports

Pakistans international trade is suffering from huge amount of deficitdue to low demand for its exports. Domestic political instability alsoaccounts for trade deficit. The trade deficit stood at $9.7 billion in FY2007 and rose to $15 billion in FY 2008. Pakistan is a member ofseveral international organizations such as ASEAN, ECO, SAFTA,WIPO and WTO. Steps have been taken to liberalize the trade andinvestment regimes of the country. Due to increasing current accountdeficit, the trade gap range of maximum tariffs was raised from 20%-25% to the 30%-35% on 300 luxury items by Pakistani government in

the 2008-09 budget. However, the growth rate of GDP dropped to5.8% in 2008 and public and external debt indicators worsened.

The major export earnings come from textiles. The country has notbeen able to expand its exports in other sections due to which it hasto suffered shifts in world demand. The government continues with itsefforts to diversify the countrys industrial base so as to expand itsexports. However, total exports fell from $21.09 billion in 2008 to$17.87 billion 2009. The total imports also reduced from $38.19 billionin 2008 to $28.31 billion in 2009.


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Foreign exchange

Pakistans exchange reserves decreases throughout 2008. The

state bank holding of foreign exchange reserve fell from $14.2 billionat the end of October 2007 to #3.4 billion at the end of October 2008.

Exchange rate after remaining stable for more than four years,lost significant value against US dollar and decrease by 21% duringMarch-December 2008. Most of the decrease of rupee against dollarwas recorded in post November 2007.

However, with the successful signing of standby arrangementswith the IMF, the rupee got back some of its lost value. With

substantial import compression and revival of external inflows fromabroad in the current fiscal year, the exchange rate will remain stableat Rs 80-82 per dollar.

External financing

The global crisis has restricted Pakistans ability to tapinternational debt capital markets to raise funds. An increasing cost ofborrowing internationally, coupled with deterioration in the countrys

credit rating has ruled out issuance of government paper as afinancing mechanism. Pakistans presence in the international capitalmarkets in 2008-09 was limited to the repayment of Eurobondamounting to US$ 500 million made in February 2009 with no newissuance at the backdrop of financial crisis engulfing the globalmarkets.


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Banking sector

According to Fitch ratings, the Pakistani banking system has,

over the last decade, gradually evolved from a weak state-owned to aslightly improved and active private sector motivated system. But asof end 2008, data from the banking sector confirms a slow down. Asof October 2008, total deposits fell from Rs 3.77 trillion in Septemberto Rs 3.67 trillion. Provisions for losses over the same period went upfrom Rs 173 billion in September to Rs178.9 billion in October.

Market analyst Muhammad Suhail told the Los Angeles times.The global crisis has really fuel to the fire. There was a time windowearlier this year to address all this, and we missed it. The drying up of

credit internationally has hit Pakistan hard with the banking systemsuffering a severe liquidity problem. Overnight call rates rises somuch and its ranging from 32 to 40 percent.

Circular debt

On 26 January 2009, Raja Pervaiz Ashraf, Minister for waterand power, told the senate that the federal government will settle halfof the Rs 400 billion circular debt by the end of January.

Circular debt arises when the Government of Pakistan owesand is unable to pay billions of rupees to oil marketing companies(OMC) an to independent power producers (IPPs).

Stock market

The Karachi stock market exchange (KSE) is Pakistans largest andthe runniest

exchange. It was the Best performing stock market of the world forthe year 2002.

Due to the global financial crisis stock market also disturbs verymuch. As of the last day of December 2008 , Karachi stock exchangehad a total of 653 companies listed with an accumulated marketcapitalization of Rs 1.85 trillion ( $23 billion). On 26 December 2007,


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Karachi stock exchange, as represented by the KSE-100 index closedat 14814 points, its highest close ever, with a market capitalization ofRs 4.57 trillion ($58 billion). As of 23 January 2009, KSE-100 indexstood at 4929 points with a market capitalization of Rs 1.58 trillion

($20 billion), a loss of over65 percent from its highest point ever.


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Inflations

Rising food and fuel prices have been a major source of

inflationary pressure in South Asian countries especially Pakistan. InPakistan, food prices mad a bigger impact on inflation than fuel, andwheat prices more than doubled, due to poor domestic production andexport restrictions. The combined effects of lower food and fuel pricesalong with demand management are reducing inflationary pressure inmost South Asian countries but conditions have not been thatfavorable in case of Pakistan.

In the year 2009 core inflation rose to 18% from the 14.7%

2008. In year 2009 inflation accelerated at rapid speed mainlybecause of food prices which increased as a result of high prices ofwidely consumable items such wheat, wheat flour , sugar and meatetc, owing to their to their supple shortage


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Economic business sector impact

Economic activity is the life blood of a nation. For a country to

survive it is important that its economy is sound and successful andthat business activity flourishes, but the global credit crisis andliquidity problems of many global corporations have already led to netcapital outflows from rising markets, uncertain new investmentprojects.

With fast depleting international reserves there is growing fearthat the country may be forced into failure to pay on its foreignobligations. It was because of the fear that on October 6, standard

and poors and moodys, two of the largest rating agencies,downgraded Pakistani bonds. This has a created a terror andinvestors have begun to fear weathers Pakistan will be able to paythem back.

Impact on textile industry

Pakistan textile industry is facing an uncertain environment. Followingfew factors like increase in input cost of minimum wage by 50 percent,

increasing interest rates, non-guaranteed energy supplies, lack of Rand D and reduction in cotton production, put a negative impact onthe industrys competitiveness internationally, because of the entiresituations the companies are downsizing. Production units are beingshut down and around 5000000 of the workers lost their jobs. Aftersurviving load shedding now industries have face gas load sheddingthis also increase their cost so thats why our industry didnt progressand gets into loss. When light is gone in industry it take almost 30minutes to start work again and thats the big problem your time alsowaste and your cost also increasing.

Social Sector Impacts

Every problem that enters the society has its social costs thatthe country has to bear. Pakistan where poverty and unemployment ismuch already, financial crisis increases the situation.


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Poverty and unemployment

Food prices have a large bearing on poverty rate. A review ofprice trends of essential items during 2007-08 indicates that the prices

of daily life such as wheat, flour, rice, edible, oil, vegetables andpulses. Since April 2007, the economy has witnessed over 200%increase in the price of palm oil; and an increase of 150% in wheatprices, while over 100% increase in the price of oil in the internationalmarket.

The government estimates that about 25% of population live belowthe povertyline and this average increases just because of food inflation.

Economic growth has slowed down considerably during the lastthree years. The industry and construction sectors have contracteddue to the domestic slowdown and energy shortage and also due toglobal recession. People are being laid-off especially from foreign ormultinational companies in order to reduce costs through downsizing.It has become even tougher for a freshman to find a suitable job thanit was five years from now. According to one estimate, Pakistansunemployment rate in urban areas is nearly 40% and in rural areasover 60%. Increase in poverty means, decrease in average standard

of living, poor health and education, and low-paying job, morepopulation which is again makes it difficult to maintain their needs


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Future and alternative sources of energySome experts argue that the world is heading towards a globalenergy crisis due to a decline in the availability of cheap oil and

recommend a decreasing dependency on fossil fuel. This has ledto increasing interest in alternate power/fuel research such as fuelcell technology, hydrogen fuel, biomethanol, biodiesel, Karrickprocess, solar energy, tidal energy and wind energy. To date, onlyhydroelectricity and nuclear power have been significantalternatives to fossil fuel (see Future energy development), withbig ecological problems (residues and water spending). Hydrogengas 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, hydrogenstill needs another source of energy to create it, also at a lossduring the process. This has led to hydrogen being regarded as a'carrier' of energy rather than a 'source'.There have been alarming predictions by groups such as the Clubof Rome that the world would run out of oil in the late 20th century.Although technology has made oil extraction more efficient, theworld is having to struggle to provide oil by using increasinglycostly and less productive methods such as deep sea drilling, anddeveloping environmentally sensitive areas such as the Arctic

National Wildlife Refuge. The world's population continues to growat a quarter of a million people per day, increasing theconsumption of energy. The per capita energy consumption ofChina, India and other developing nations continues to increaseas the people living in these countries adopt western lifestyles. Atpresent a small part of the world's population consumes a largepart of its resources, with the United States and its population of296 million people consuming more oil than China with itspopulation of 1.3 billion people.

Efficiency mechanisms such as Negawatt power can providesignificantly increased supply. It is a term used to describe thetrading of increased efficiency, using consumption efficiency toincrease available market supply rather than by increasing plantgenerationcapacity.

ALTERNATE ENERGY TECHNOLOGY


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The Energy Ministers statement that country will have to face thecurrent energy crisis for next three years shows that he is unable toalleviate the misery of average Pakistani family and expects them toconduct daily routine chores in extreme summer heat without eight tosixteen hours of electricity. It brings us to : 1) Energy Minister hasfailed to come up with a solution to end energy crisis includingnationalization of energy sector and adoption of alternate energy. 2)Which law permits countrys rulers to enjoy uninterrupted supply ofelectricity while the public who they serve suffers due to loadshedding for no fault of their own?

Can PM justify uninterrupted supply of electricity in VIP pocketsacross the country while average Pakistanis face unending powerrationing? Similarly, will the rulers clarify for the ordinary people which

law allows backup generators for hundreds and thousands of suchVIPs nationwide whose number is growing by the hour? Shouldnt thecountrys law lords be taking suo moto notices to end generatorculture by unveiling number of generators being used for the VIPs,how much they cost to the national exchequer annually and which lawauthorizes the procurement, maintenance and fueling. There is noprovision in countrys laws that authorize spending and regularizationof billions of tax-rupees being wasted on the procurement, runningand maintenance of these illegal generators.

It is hoped concerned including Public Accounts Committee, citizenwatch groups, legal fraternity will help countrys courts and PM to endwastage of tax dollars amidst reports that current 522 billion fiscaldeficit will climb to 957 billion by the end of fiscal year 2007/8 and ananother impending fuel prices increase before June 30. Therebyrendering immediate borrowing of some three billion US dollar loan tosustain countrys (failing) economy. These figures, energy ministersstatement of requiring three-year gestation period for permanentlyending long hours of load shedding and instead calling for adoption of

energy conservation measures mandate PMs intervention to end themisery of an average Pakistani who has been forced to face summerheat and humidity for no fault of his own and pay for national policyfailure and corruption.

PM to show genuine support for peoples plight and as part ofausterity drive should ordering following steps to end corruption in


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electricity and gas departments: 1) Inclusion of all VIP areas acrossthe country including Islamabad into the current load sheddingschedule. 2) Across the board removal of generators and air-conditioning/heating systems from govt. offices and residences to endVIP culture and save energy consumption. 3) Withdrawsubsidized/free electricity/gas for public servants, office holders andgovt. departments because it encourages waste and negates basicspirit of countrys IPRI Fact file law. Otherwise, also lawmakers andgovt. employees as public servants cannot have free gas andelectricity paid by tax money, which is not extended to the masses. 4)The energy consumption of countrys domestic sector is less thantotal consumption of free electricity given to govt. sector. Therefore,PM should direct energy minister to save 500 MW by withdrawing freeelectricity from VIPs instead of forcing load shedding at grassroots. In

fact the national leadership to set a personal example should shareequal hours of load shedding if not more.

Energy Minister in his statement on the floor of the house said that50/100 MW of electricity will be generated from wind turbines. Theamount reflects PPPPs flawed energy policy stressing on long andmidterm plans thereby failing to provide immediate relief to masses.PM should issue immediate directions to incorporate feasiblealternate energy technology based on alternate energy mapping forfollowing reasons: 1) it can provide quick and sustainable solution fordomestic sector that consumes less than 13% of total generatedelectricity. 2) In- step with international policy replace 20-25 percent offossil fuel based current energy generation with alternate energy. 3)Cut fossil fuel imports to reduce foreign currency expenditure. 4) theplug and play and main grid compatibility of these alternate energyoptions can alleviate misery of masses suffering the heat atgrassroots due to 8/16 hour protracted load shedding schedules.

Therefore, it is need of the hour to permanently shift countrys

domestic and agriculture sectors to alternate energy to permanentlyend load shedding, reduce electricity bills and cut costs on import ofever increasing fuel prices. In this regard, state of the art affordablewind turbines, solar panels, photovoltaic panels can play an importantrole to help realize the objectives: 1) The plug and play and gridready alternate energy technology can bring immediate relief atgrassroots and end three year waiting period. 2) These alternate


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energy solutions are cheaper because: (a) Due to their proximity toconsumers it reduces line losses, which in turn reduces energy cost.For example, the alternate energy helps cut line losses internationallyaccepted standards of 5-7% against Pakistans reported line lossesexceeding 45 percent of total production, (independent observers putat 65%), which in turn forces per unit electricity prices increase torecover cost of lines losses and thefts.(b) It will allow energygeneration at districts, tehsils and individual level, which in turn willhelp end corruption at all levels and cut over head costs. 3). Cheaperenergy will promote small/medium industrial and manufacturingsetups with multiple advantages including generation/sustenance ofmillions of jobs. 4) Cheaper sustainable alternate energy solutions willsupport and sustain countrys agri-sector offering critical advantagesincluding produce increase and increasing employment opportunities.

5) Reduce energy related disputes between federation and provinces.The fact of the matter is alternate energy as highlighted in my articletime for nationalized energy sector,http://pakobserver.net/200804/17/Articles03.asp is a cheaper and with50,000 MW growth potential is the sustainable way forward to endload shedding, provide relief at grassroots and meet internationalstandards of greener earth as part of cleaner global environment.However, it is the mindset than actual challenges in energy field thatneeds to be addressed as highlighted in my article energy crisis andcorruption nexus dated 7 Jan.http://www.pakobserver.net/200801/07/Articles04.asp. PM need tohelp end corruption and stakes blocking adoption of alternate energyto provide relief to masses, uplift agri-sector and facilitate countryseconomic progress. In this regard Nawaz Sharif can play an importantrole by promoting adoption of alternate energy in Punjab. The modelin turn can be copied by the rest of the country to provide relief tomasses, sustain and generate growth and jobs in countrys agri-sector. In short 4200 MW can be generated by 1600 wind turbineswith each generating of 3 MWs. The shift to alternate energy can help

Pakistan save 300 billion rupees (4.6 billion dollars) being paid inannual subsidies to energy companies at the rate of 25 billion rupeesper month. The purchase of 1600 wind turbines should cost around0.192 billion dollars (1600 x $1,20,000 per piece) which is not onlyfraction of 4.6 billion dollars being currently paid under subsidy headbut will also cut expenditure on import of costly furnace oil and easepressure on foreign reserves etc. Logically, the adoption of alternate


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energy technology should reduce per unit cost with every passingyear. All this makes sense in wake of growing oil prices.

Finally, it is need of the hour to provide relief at grassroots byincorporating available alternate energy technologies in national

energy policy. It will help agri-sector and the industrial sector can befacilitated to adopt alternate energy technology. It will help reduceexpenditure on fuel imports and foreign reserve.

The nationalization of energy sector and adoption of alternationenergy technology can go hand in hand with already approved longand medium term policies and projects based on traditional resourcesof energy generation.

Pakistan's energy crisis: short and long-term solutions

Pakistan is in the grip of a serious energy crisis that is affecting allsectors of the economy and the various segments of the society. Asthe situation stands to-day, there are hardly any immediate solutionsto resolve the issue. A change of attitude and a change of life style isneeded at the national level which should be triggered by the rulingelite and followed by all segments of the society that have access toelectricity. At best there could be some short and long-term solutionsto the crisis but they need immediate planning and execution with anenormous investment. None of the previous rulers of the countrysolved the issue due to which the energy crisis kept on increasingregularly.

State of energy resources

Pakistan has a deficit of fossils or hydrocarbons sources of energyand to cover up the deficit, it depends upon importing crude oil at anenormous cost from its meager forex reserves. The need of crude oilis on an increase because of an improved life style which hasnecessitated the use of vehicles and cars for transportation. Import ofoil at around $110 per barrel, increases the trade deficit and thecurrent account deficit. It makes fiscal management a difficult taskwhich affects the government as well as the people.
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Contrary to the deficit of fossils or hydrocarbon resources, Pakistan isrich in hydro resources of energy. According to an estimate thecountry has enough resources to generateapproximately 40000 mwof hydro-electricity. However, presently it only generates 8000 mw ofelectricity against an installed capacity of 11327 mw. In addition thecountry can generate electricity with the help of wind and solar energywhich has not yet been exploited to meet the energy deficit. Nuclearenergy is yet another source of energy and at present PAECproduces 472 mw. It is far less than what PAEC should have beenproducing to meet the energy deficit.

Three major electricity generation agencies presently operate in thecountry. They have a total installed capacity of around 19522 mw.Their installed capacities are as follows: WAPADA: 11327 mw; KESC:

1756 mw and Independent Power Producers (IPPs), 5977 mw. PAECproduces 472 mw as stated earlier. Thermal power accounts for 64per cent of the total installed capacity, hydro-electricity accounts for33 per cent and nuclear power plants account for 3 per cent. Thermalpower is mostly produced by burning either natural gas or importedoil. The country is yet to switch over to coal from the indigenoussource of energy that is estimated to be the third largest in the worldwith a reserve of 33.0 trillion tons.

The Energy market has been changing according to the demands of

power consumption. The Prices of energy raw materials also keptchanging. According to an analysis, in the fiscal year 1990-91hydropower accounted for 45 per cent of all electricity produced in thecountry but it was reduced to 26 per cent with a 10-year period. Theshare of thermally generated electricity increased from 54 per cent to71 per cent during the same period. Needs of most of thecommercially used oil are met by imports whose prices haveskyrocketed during past five years and as such the cost of powergeneration through oil has increased.

Power consumption because of increasing needs of industry,agriculture and households has been on the rise. According to anestimate, between the period of 1990 and 2003 the total consumptionincreased by 84 per cent, from 31twh to 57twh. Presently, an annualaverage increase of 7 per cent has been postulated. The energysector, in which the government has a greater role to play, will have to


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work hard to make up for the existing deficit and to meet the growingdemand.

The reason behind the crisis

An important question in the midst of ongoing power shortage crisis,being raised is that why the energy crisis looms on our head after aninterval of around 10-15 years despite the fact that statistics aboutenergy resources, demand and consumption are well articulated.They are also readily available to planning commission and otherfederal and provincial governments. The answer is simple; poormanagement, lopsided priorities and lack of accountability on part ofthose who stay at the helm of affairs.

In the early 90s, the power crisis had started emerging and thepolitical government that was mandated to govern the country wasfaced with the issue of power crisis. The government had to resolvethe crisis by engaging almost 19 Independent Power Producers (IPP).19 IPP projects were initiated with an installed capacity of 3158 mwand investment of $4.0 billion and by March 2003 the installedcapacity was at 2728 mw that has reached to 5977 mw throughexpansion. Till 2005, supply of electricity produced through differentpower generating units was surplus to demand by around 450 mw but

since then demand has been outstripping supply because there waspractically no additional power generation.

The government did not anticipate that there would be an increase indemand of electricity and it was its responsibility to arrange the supplyaccording to the demand. Consequently, during summer, 2007,supply of electricity ran short of 2500 mw. It is being anticipated thatthis year the deficit between supply and demand could be as high as3000 mw. By the end of year 2010, the deficit could be as large as5500 mw. There are no immediate solutions to generating additional

power through any source because a unit takes at least 2-3years toestablish properly. More than 5 years is required to construct ahydroelectric dam and the investment is enormous. This crisis hasliterally paralysed the construction industry, badly affected agricultureand made life hell for the citizens. In view of existing ground realitiesand constraints to address power crisis by generating electricity withina short span of a few months, the need to make the best use of


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existing power generation by taking conservation measures atindividual, community and national level are essential. Thesemeasures if implemented with commitment and honesty of purposecan help a lot of people to over come negative implications of powercrisis.

Energy conservation measures

Energy conservation or efficient use of electricity is what is needed atthis crucial time. There are three major users of electricity and theyneed to be educated and motivated to play their role in energyconservation. The three stakeholders are: industrial sector, transportsector and domestic/household sector. Each sector needs to be dealtseparately to high light the efficacy of conserving energy.

The Industrial sector is consuming the largest amount of energy in thecountry. It consumes around 45 per cent of the total commercialenergy. Most of them are concentrated in a few industrial areas closeto or within large cities such as Karachi, Lahore and othercomparatively smaller cities. Industrial units are not energy efficientand management practices also need improvement to make efficientuse of electricity. A study carried out by the ENERCON reveals thatefficient use of electricity by the industrial sector could save up to 23

per cent of electricity. The focus on energy conservation is on theimprovement of steam distribution systems, air conditioning,refrigeration and modernising and revamping energy efficientcombustion processes and controls.

The transport sector is the second largest consumer of energy.According to an ENERCON study, this sector consumes 28 per centof total national consumption of energy. This could be reduced by 10per cent if car owners alone were to economise on consumption offuel and kept their car engines fully tuned up. The sector has the

potential to be 20 per cent energy-efficient if railways, shipping andaviation are included. One of the visible constraints that keeps theindustrial and transport sector away from being energy-efficient is thelack of observing energy conservation rules and regulations which arealready laid down by the government. Their focus is perhaps on short-term gains that run contrary to national interest.


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The third largest consumer of electricity is domestic/household sectorthat consumes around 21 per cent of electricity produced in thecountry. According to a study this sector could be efficient by 30 percent by avoiding wasteful habits of consuming energy such askeeping markets fully lit etc. A positive development that has so fartaken place in this sector is gradual shifting over to use of energysavers. Similarly energy could be saved by minimum use of airconditioners. The entire household should be well-aware of energyconsumption.

To achieve meaningful results about conservation of energy thecharity should start from home, that is, the ruling elite should take theinitiative and set example to conserve energy as a national imperativefor emulation by other segments of the society. If conservation

measures stated above were to be implemented partially, it would goa long way in addressing the energy crisis immediately without anyadditional cost.

Measures by the government

The outgoing government had belatedly addressed the power crisisby hyping up the construction of mega hydro-electric dams includingpolitically controversial Kalabagh dam without going into details about

their feasibility and sources of investment. The new government has areal big challenge of addressing the energy crisis at hand. Its firstpriority should be to implement immediate measures that might bringsome relief to the public. It should also immediately embark upon theprogrammme of expansion of generating capacities that has been laiddown by the previous government under Vision 2025 programme.

It envisions increasing existing power generating capacity by 10000mw by 2010 and around 35000 mw by 2025 at an enormous cost of$35 billion to be shared by the government and private sector. The

share of different sources of energy is stipulated to be as follows:hydro-electricity: 22563 mw, new gas fired plants: 4680 mw, coal firedplants: 4350 mw, nuclear plants: 1800 mw and finally 1500 mw fromrenewable energy resources. It is certainly an ambitious plan thatneeds to be implemented on priority basis with changes that the newgovernment might like to make within its national policy framework.


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Conclusion

It hardly needs to be emphasised that electricity is the lifeline ofnational economy and the people at large. The Economy and public

life practically come to a halt because of the load shedding. Theexisting crisis can be addressed by the government by taking promptmeasures. There is hardly any room for neglect or delay.

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Energy Prices and Economic Growth: Time Series Evidence fromAsain Developing Countries.Energy Economics 22:6 (December), 615626.Banerjee, A., J. Dolando, J. Galbraith, and D. F. Hendry (1993) Co-integration,Error Correction, and the Econometric Analysis of Non-stationaryData. OxfordUniversity Press.Barro, R. J., and X. Sala-i-Martin (1995) Economic Growth. New York:

McGrawHill, International Edition.Bashar, Amanullah (2000) Pakistan Energy ConferenceSpecialReport. Pakistanand Gulf Economist. April 2430.Chandler, W., and H. Gwin (2003) Helping China Manage EnergyGrowth.[downloaded from internet].Dornbusch, R. (1992) The Case for Trade Liberalisation in DevelopingCountries.

Journal of Economic Perspectives 6, (Winter), 6985.Ebinger, C. K. (1981) Pakistan: Energy Planning in a Strategic Vortex.Bloomington, USA: Indiana University Press.Gujarati, D. N. (1995) Basic Econometrics. (Chapters 17, 21 and 22),(3rd edition).New York: McGraw Hill, International Edition, USA.Kazmi, S. (2000) PEPCO. Pakistan and Gulf Economist19:18, May.


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Rehana Siddiqui200Kemal, A. R. and S. I. Ahmad (1992) The Sources of EconomicGrowth in Pakistan.Study prepared for the Ninth Five-Year Plan. Pakistan Institute ofDevelopmentEconomics, Islamabad. (May).Kemal, A. R. (1999) Privatisation in PakistanSocial Effects andRestructuring.Pakistan Institute of Development Economics, Islamabad.(September).(Unpublished paper.)Lamech, R., and K. OSullivan (2002) Energy. (Chapter 21 andTechnical Note Q)

In Jeni Klugman (ed.) A Sourcebook for Poverty ReductionStrategies: Vol 2:Macroeconomic and Sectoral Approaches. Washington, D. C.: TheWorld Bank.Maddala, G. S., and In-Moo Kim (1998) Unit Roots, Cointegration,and StructuralChange. (Chapter 2). Cambridge: Cambridge University Press, USA.Mahmud, S. F. (2000) The Energy Demand in the ManufacturingSector of Pakistan:Some Further Results. Energy Economics 22:6 (December), 641648.Moroney, J. R. (1992) Energy, Capital and Technological Change inthe UnitedStates. Resource and Energy14:4 (December), 363380.Pakistan, Government of (2001) Energy Year Book. Islamabad:Government ofPakistan.Pakistan, Government of (2001) Interim Poverty Reduction Strategyof Pakistan

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