report on enrgy crises

8/8/2019 Report on Enrgy Crises

http://slidepdf.com/reader/full/report-on-enrgy-crises 1/26



Business Research Methods

Submitted ToSir Rasheed

Submitted By

M.Zahid Iqbal10645Fazan Raza10646

M.B.A 3rd (EVENING)

NATIONAL UNIVERSITY OF MODREN LANGUAGES MULTAN

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AcknowledgementThanks to the ALMIGHTY ALLAH, the merciful most beneficial, for everything He hasgiven us & all that has not.First of all we are thankful to our honorable Sir Rasheed for giving us chance to improveour skills by making research on the topic energy crises impact on industrial sector. This

will definitely help us building our talent, skills and for better opportunities.We pay thanks to every person who helped us in the research to complete the topic onenergy crises impact on industrial sector, specially our friends, and respected teachers because with out there appreciation and help the research on this topic cannot becompleted.Last but not the least our beloved PARENTS.


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Preface

In this report we are trying to give a important Information for our topic energy crisesimpact on industrial sector. We have done our level best to make our readers aware aboutthis topic. To make them able to imagine what is the importance of this topic.

We have described firstly the introduction on energy crises in Pakistan, Strategies of energy crises, define the actual problems, impact on imports and exports of our countrydue to the energy crises, economic review and variables of energy crises and in last givethe solution to solve the energy crises in Pakistan. We give the energy crises and theindustrial out puts.


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Table of Contents Page No1. research proposal 62. Introduction 63. Problem identification 64. Background information

5. Research goal6. Theoretical framework 7. variables8. Research design9. Type and nature of the study10. Data collection11. Types of energy 612. Growth 1013. Growth performance of components 1214. Variable of energy crises 1215. Growing Economy, Growing Energy Needs 12

16. Pakistan Trade, Exports and Imports 1217. Pakistan Exports Commodities 1318. Pakistan Exports Partners 1319. Foreign exchange 1320. External financing 1321. Banking sector 1422. Circular debt 1423. Stock market 1424. Inflations 1525. Economic business sector impact 1626. Impact on textile industry 16

27. Social Sector Impacts 1628. Poverty and unemployment 1629. Future and alternative sources of energy 1730. Alternate energy technology 1731. Pakistan's energy crisis: short and long-term solutions 1932. State of energy resources 2133. The reason behind the crisis 2234. Energy conservation measures 2335. Measures by the government 24

36. Hypothesis 25

37. Data analysis 2538. Conclusion 2539. References 25


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Research ProposalEnergy crises are the major problem of our country, due to this reason our economy isgoing to downward. There are number of industries in our country which close due to theenergy crises which directly effect our economy. The reason for chose this problem is toidentify the main problem and select the best way by which we overcome this problem.

We find out the reason for this problem and give the suggestion to over come this problem.

IntroductionEnergy crises is one of the most important and highly growing problem is Pakistan. Inthis report our main focus is on the energy crises and its impacts on Pakistan’s economy.Recent rise in energy prices, shrinking existing resources, and the search for Alternativesources of energy and energy conservation technologies have brought into Focus theissue of causality between energy use and economic growth. Economic growth mayaffect the demand for energy significantly. The country may face energy crisis by theyear 2007 following healthy growth of 13 per cent in electricity demand during the lastquarter, which will erode surplus production in absence of commissioning of any new

power generation project during this financial year. As per Pakistan Economic Survey2003-04, electricity consumption has increased by 8.6 per cent during first three-quarter of last fiscal year. 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 for ‘quantum jump’ in power generation. Theexperts say it could only be possible through a mega project of hydropower generation;otherwise the gap between firm supply and peak demand will remain on the rise.

Problem IdentificationThe main problem which we identify is the lack of energy due to the different reasons, inthis report we see who energy crises is start and how it is impacting on different sectorsof Pakistan.

Background InformationPakistan Economic Survey 2003-04, electricity consumption has increased by 8.6 per cent during first three-quarter of last fiscal year. However, a top level WAPDA officialmaintained that electricity demand 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 for ‘quantum jump’ in power generation. Theexperts say it could only be possible through a mega project of hydropower generation;otherwise the gap between firm supply and peak demand will remain on the rise. Thecountry may face energy crisis by the year 2007 following healthy growth of 13 per cent

in electricity demand during the last quarter, which will erode surplus production inabsence of commissioning of any new power generation project during this financialyear. Energy crises is one of the most important and highly growing problem is Pakistan.In this report our main focus is on the energy crises and its impacts on Pakistan’seconomy. Recent rise in energy prices, shrinking existing resources, and the search for Alternative sources of energy and energy conservation technologies have brought intoFocus the issue of causality between energy use and economic growth. economic growthmay affect the demand for energy.


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Research GoalsIn this research we see the strength of the energy crises and how it is impacting on theeconomy of Pakistan and how we can overcome on energy crises.

Theoretical Framework After analyzing the Pakistan’s energy shortages and their different reasons for theseshortages the following variables were identified.

VariablesDependant VariablesElectricityIndependent variablesShortage of DamesBad Management of Govt.Increase in consumptionIncrease the Price of PetrolLess Utilization Of Resources

Research DesignTypes and Nature of StudyDescriptive StudyHypothesis Testing

Data Collection MethodsWe use the Secondary data collection method for our research purpose.

Types of EnergyElectricity Natural GasOilHydroCoal Nuclear

ElectricityPakistan 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 during the period 2005-2015. An annual installation capacity of about 2000 MW is required for the next 10years. Pakistan can overcome the energy crises by increasing the generation of electricityfrom different ways.

Natural Gas

Pakistan’s 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 expected in 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 by increasing the utilization of the Natural gas.


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OilAll predictions now failing and the oil prices are rising and now about to reach 100 level.Who knows that in market trading if even the customers are buying the oil on +100 $.The reason being given for this enormous rise is the US oil reserves are depleting andtherefore customers are ready to purchase the oil at any price available. The future

prospects also not encouraging. All trading is being made on +90 $. OPEC promised toraise its out put but with out any IPRI Fact file 16 significant effects. For the time beingthe prices were dipped but raised again on much higher values. The winter is just arrivingand nobody knows that these prices will settle at what level. Rising tension between USand Iran is one reason. Some sources are predicting the attack on Iran is imminent. If thecondition continues like this who is going to benefited. Emerging economies anddeveloping will suffer most. Their economy is dependent on energy resources. How cansurvive and how can they meet their production commitments. In recent months oilsurged from 70$ to 92$ and still rising. Those industries which consume more energywill suffer with maximum. It will lead to rise of inflation shutting down in efficientindustries and rising unemployment in third world countries. When come to individual

the poor will suffer most .High income group will survive and it will not effect on their livings. But the strains coming on poor in third world countries will transform to socialunrest and hence will cause instability in the region. Pakistan economy is already under intense pressure. On one hand it has the competitors like China and India giving cutthroat fight. Another end it has continuous problem on its western borders draining itsresources and causing political chaos. Pakistan exports and its all economic activities aredependent of uninterrupted energy supplies for its energy requirement maximum sharestill of furnace which is imported from Middle East countries. Rising prices will bring awave of inflation. Already many textile mills closed down due to higher production costswhich make it uneconomical further increase in oil prices will definitely bring morestrain on existing working units. Firstly Government absorbs the fuel bills, now this

time Govt. increase the prices which directly affect on the poor people of Pakistan.Today only there are news that Pakistan is going ahead 2000 MW power plant based onfurnace oil. Now we have to look for the future and sustainable economic activity.Development of Renewable energy resources is not moving ahead beyond symposiumsand conferences or in other crude words lip services. Pakistan's future as economic leader in the region is at stake if sustainable cheap energy resources are not developed on priority. Energy Crisis in Pakistan will increase, so the solution is not so simple for theenergy crises in Pakistan. The hurdles should be identified 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 be taken to save energy so it can beused 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 year’s oil import billamounted to about $6.5 billion. Oil prices burden expected to be even higher in future.Pakistan can overcome the energy crises by increasing the by increasing the utilization of the Oil of Pakistan.


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Wind EnergyPakistan is facing acute shortage of energy. with 7% increase of its economy this shortfall soon to slow down its economic growth and will shatter its dream to become one daya developed country.Most of its energy demand is being met with either Hydro power or thermal units.

Pakistan is spending a very large amount of foreign exchange to purchase the furnace.The gas reserves already start depleting and oil markets are sky rocketing. To overcomethis shortage Government take a initiative to investigate Alternate energy resources inPakistan developed Alternate Energy Board AEDB. The Board is headed by Ret Air Marshal Shahid Hamid. Identified 50,000 MW energy potential from wind resourcePakistan is blessed with a large resource of wind corridor. Although Pakistanmeteorological Department was gathering wind data for quite long time but recentlyUnited States provided wind energy map for Pakistan which confirms a strong windcorridor in Sind coastal area. AEDB issued about 80 LOI to the investors List of LOIholders to develop 50 MW wind farms. Out of which 15 are already issued the land andfeasibility reports and financial closings are in progress.

The following is a brief road map for developing a wind form1. Submission of proposal by sponsor 2. Review of proposal by AEDB3. Posting of Bank Guarantee4. Issuance of letter of intent (LOI)5. Feasibility study6. Generation License7. Tariff Determination8. Submission of Performance Guarantee9. Tariff determination by NEPRA10. Submission of performance guarantee

11. Issuance of Letter of supportHydel energyWater flowing in the rivers has kinetic energy. Once they are used to drive the turbineand produce electricity the power generated as Hydel Energy. Power produced by theturbines 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 inthe valleys it changes its head very rapidly. This energy can be converted into electricalenergy.Two methods are normally used:-1. Dams2. Run of River projects.

In case of Dams the water flow is restricted by making a huge storage device and thehead of water is increased, the water then is allowed to flow by means of gates and passthrough the turbines, the head of reservoir level is maintained to provide uniform power,and the water stored in peak season additionally is used for irrigation purposes in dryseasons.In run of river projects the water is diverted through the tunnels and once it gains thehead allowed to fall and pass through the turbines and back to river. the water in these projects is continuously flowing and not being stored.


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Geographical situation is paramount importance in choosing a suitable site for the hydro project and it evolves a very serious time and money consuming study. Once a site islocated further detailed feasibility study is required before proceeding any serious effortto 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, rain humidity6. 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 meters depth

12. Laboratory testing of the cores samples13. Tectonic study to evaluate earth quake dangers

Coal energyif all The oil Reserves of Saudia Arab & Iran Put Together These Are Approximately 375Billion Barrels, But A Single Thar Coal Reserve Of Sindh is about 850 Trillion CubicFeet, Which is More Than Oil Reserves Of Saudia & Iran. These reserves estimated at850 trillion cubic feet (TCF) of gas, about 30 times higher than Pakistan's proven gasreserves of 28 TCF. Dr Murtaza Mughal president of Pakistan Economy Watch in astatement said that these reserves of coal worth USD 25 trillion can not only cater theelectricity requirements of the country for next 100 years but also save almost four billiondollars in staggering oil import bill. Just 2% usage of Thar Coal Can Produce 20,000

Mega Watts of Electricity for next 40Years,without any single Second of Load Sheddingand if the whole reserves are utilized, then it could easily be imagined how much energycould be generated. The coal power generation would cost Pakistan PKR 5.67 per unitwhile power generated by Independent Power Projects cost PKR 9.27/- It Requires JustInitial 420 Billion Rupees Initial Investment, Whereas Pakistan Receives annually 1220Billion from Tax Only Chinese and other companies had not only carried out surveys andfeasibilities of this project but also offered 100 percent investment in last 7 to 8 years butthe “Petroleum Gang” always discouraged them in a very systematic way But Petroleumlobby is very strong in Pakistan and they are against any other means of power generationexcept for the imported oil. This lobby is major beneficiary of the increasing oil bill thatis estimated above 15 billion dollar this year. Even GOV. is planning to Sell all these

reserve to a company on a very low price. When Pervaz Musharaf was president he gavegreen signal to embark upon the initiation of work on exploiting energy potential of thesecoal reserves of Thar under a modern strategy.


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GrowthThe growth in manufacturing sector of Pakistan had been steadily declining for the lastthree 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 theindustrial output is mainly due to capacity constraint and shutdown of many industrial

units, because of high cost of doing business. World Bank (February 2008) points out inthe report that Pakistan suffers from the lack of infrastructure facilities in the water,irrigation, power and transport sectors. In the energy sector, the country will face sever shortage of around 6000 megawatt by 2010. Similarly inefficiencies in transport sector cost the economy between 4-5 percent of GDP each year. The major reason of currentslowdown in manufacturing output is said to be frequent power outages due to lowelectricity production. The ongoing energy shortages caused by an ageing energyinfrastructure, chronic under investment in expansion and maintenance and unsustainable pricing regimes slow industrial output. Apart from infrastructure and capacity constraintissues manufacturing sector would further slow down in the days to come because of fastdepreciating value of rupee against dollar, which would made imported raw material

more costly.Energy is the most problematic issue in the world. Demand of energy from the emergingmarkets like China and India growing day by day. Pakistan with small manufacturingmarket surrounded by major emerging markets like China, India, Malaysia, Indonesia,Philippines and Bangladesh, will be worst effected by rise in energy prices. Pakistan withofficial figures of 8 percent growth rate will have a definite rise on demand of energy for minimum 3 percent. As a rule of thumb modern day manufacturing industries utilize atleast 33 percent production cost in terms of energy prices. Any increase in energy costwill effect the production cost and force the manufacturers that either to reduce the labor cost or to remain competitive in market by improving the quality standards. Major giantslike China and India will sustain with this situation but smaller economies like Pakistan

will suffer badly.All predictions now failing as the oil prices reached its maximum ever at around $150 per barrel. The reason has been given for this enormous rise is the US oil reserves aredepleting and therefore customers are ready to purchase the oil at any price available. InUSA the 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 and tornados 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 few years before oil was being trade on $20 per barrel and no body ever thought that the weather conditions in theGulf can affect the oil market. The future prospects are not very encouraging. Emerging

and developing economies like Pakistan will suffer most. Those industries whichconsume more energy will suffer with maximum. It will lead to rise of inflation, shuttingdown industries and rising unemployment in the third world countries.Pakistan’s economy is already under intense pressure due to the competitors like Chinaand India giving cut throat flight, at the other end it has continuous problem on itswestern boarders draining its resources. Pakistan exports and all its economic activitiesare dependent on uninterrupted energy supplies. For its energy requirement, maximumshare is still of furnace, which imported from Middle East countries. Already many


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industrial units closed down due to higher production costs which make it uneconomical.Further increase in oil prices will defiantly bring more strain on existing working units.On famous oil embargo days a lot of research in Europe was carried out to find thealternate source of energy. The findings are available even in college books. However with the drop of oil prices such alternatives were uneconomical and therefore shelved.

This is the time that Pakistan now asses very carefully that in case of rising oil priceswhat actions it should take to conserve energy and to find the alternate source of energy.A volunteer option for all energy users is to conserve energy, to make the plants moreefficient and to see that each drop of energy is saved. If we make serious study on thissubject then we may achieve up to 20% saving in energy, hence saving in our productioncost and making our products more attractive in international market. Of course theenergy conservation programs cost money. However the investment will be rewardingand will be beneficial in long terms.Pakistan’s thermal units are day by day become aging, reducing their output power. Aliberal and progressive policy with less bureaucratic approach towards energy producingunits will help and bring attractive investment in power sector. Water conservation

projects focusing on the paving of water courses to prevent 40 percent of irrigation water that is lost due to seepage have also become imperative. Coal-based power generationmay be one option given the country's huge coal deposits in Southern Sindh Province.Development of renewable energy resources is not moving ahead beyond symposiumsand conferences. Pakistan’s industrial sector is at stake if sustainable cheap energyresources are not developed on priority. Energy efficient plants and machines are therecipe for our survival.

Growth Performance of Components of Gross National ProductDespite severe challenges, the economy has shown resilience in the outgoing year.Growth in Gross Domestic Product (GDP) for 2009 10, on an inflation adjusted basis,‐ ‐ has been recorded at a provisional 4.1%. This compares with GDP growth of 1.2%

(revised) in the previous year. For the outgoing year, the Agriculture sector grew anestimated 2%, against a target of 3.8%, and Economic Survey 2009 10 previous year’s‐ growth rate of 4%. While the Crops sub sector declined 0.4% over the previous year,‐

Livestock posted a healthy rise of 4.1%. The performance of the Agriculture sector was boosted by the weakening of the El Nino phenomenon, after late winter rains. Industrialoutput expanded by 4.9%, with Large Scale Manufacturing (LSM) posting a 4.4% rate of growth. The Services sector grew 4.6%, as compared to 1.6% in 2008 09. Overall, the‐ Commodity Producing Sectors are estimated to have expanded at a 3.6% pace, whichrepresents a significant turnaround from the anaemic growth rates of the previous twofiscal years.

Variables for Energy Crises

Growing Economy, Growing Energy Needs Pakistan’s economy is performing at a veryhigh note with GDP growing at an exceptional rate, touching 8.35% in 2004-05.This year official expectations are that GDP growth rate will be around 6.5 – 7.0%.For the coming years, the government is targeting GDP growth rate above 6%. GrowingEconomy, Growing Energy Needs With economy growing at such a pace, the energyrequirements are likely to increase with a similar rate. Pakistan’s energy requirement by2015 is likely to cross 120MTOE. By 2030, the nation’s requirement will be 7 times thecurrent requirement reaching 361MTOE


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Social and economic effectsThe macroeconomic implications of a supply shock-induced energy crisis are large, because energy is the resource used to exploit all other resources. When energy marketsfail, an energy shortage develops. Electricity consumers may experience intentionallyengineered rolling blackouts which are released during periods of insufficient supply or

unexpected power outages, regardless of the cause. Industrialized nations are dependenton oil, and efforts to restrict the supply of oil would have an adverse effect on theeconomies of oil producers. For the consumer, the price of natural gas, gasoline (petrol)and diesel for cars and other vehicles rises. An early response from stakeholders is thecall for reports, investigations and commissions into the price of fuels. There are alsomovements towards the development of more sustainable urban infrastructure.

In 2006, US survey respondents were willing to pay more for a plug-in hybrid car In the market, new technology and energy efficiency measures become desirable for consumers seeking to decrease transport costs. Examples include:In 1980 Briggs & Stratton developed the first gasoline hybrid electric automobile; alsoare appearing plug-in hybrids. the growth of advanced biofuels.Innovations like theDahon, a folding bicycle modernized and electrifying passenger transport Railwayelectrification systems and new engines such as the Ganz-Mavag locomotive variablecompression ratio for vehicles Other responses include the development of unconventional oil sources such as synthetic fuel from places like the Athabasca OilSands, more renewable energy commercialization and use of alternative propulsion.

There may be a Relocation trend towards local foods and possibly micro generation, solar thermal collectors and other green energy sources. Tourism trends change and ownershipof gas-guzzlers vary, both because of increases to fuel costs which are passed on tocustomers. Items which were not so popular gain favor, such as nuclear power plants andthe blanket sleeper, a garment to keep children warm. Building construction techniqueschange to reduce heating costs, potentially through increased insulation.


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Pakistan Trade, Exports and ImportsPakistan’s international trade is suffering from huge amount of deficit due to low

demand for its exports. Domestic political instability also accounts for trade deficit. Thetrade deficit stood at $9.7 billion in FY 2007 and rose to $15 billion in FY 2008. Pakistanis a member of several international organizations such as ASEAN, ECO, SAFTA, WIPO

and WTO. Steps have been taken to liberalize the trade and investment regimes of thecountry. Due to increasing current account deficit, the trade gap range of maximumtariffs was raised from 20%-25% to the 30%-35% on 300 luxury items by Pakistanigovernment in the 2008-09 budget. However, the growth rate of GDP dropped to 5.8% in2008 and public and external debt indicators worsened. The major export earnings comefrom textiles. The country has not been able to expand its exports in other sections due towhich it has to suffered shifts in world demand. The government continues with itsefforts to diversify the country’s industrial base so as to expand its exports. However,total exports fell from $21.09 billion in 2008 to $17.87 billion 2009. The total importsalso reduced from $38.19 billion in 2008 to $28.31 billion in 2009.

Pakistan Exports Commodities

The major export commodities of Pakistan are:Textiles (garments, bed linen, cotton cloth, yarn)RiceLeather goodsSports goodsChemicalsManufacturesCarpets and rugsPakistan Exports Partners

The following graph depicts Pakistan’s export partners with percentage share as of 2008:


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Impact on G.D.PPakistan’s economy is performing at a very high note with GDP growing at anexceptional rate, touching 8.35% in 2004-05.In its history of 58 years, there has beenonly a few golden years where the economy grew above 7%. This year officialexpectations are that GDP growth rate will be around 6.5 – 7.0%. For the coming years,

the government is targeting GDP growth rate above 6%. With economy growing at sucha pace, the energy requirements are likely to increase with a similar rate. For 2004-05,Pakistan’s energy consumption touched 55.5 MTOE (Million Tons of Oil Equivalent).The energy consumption is expected to grow at double digit if the overall economysustains the targeted GDP growth rate of 6% by the government. Pakistan’s energyrequirements are expected to double in the next few years, and our energy requirements by 2015 is likely to cross 120MTOE. By 2030, the nation’s requirement will be 7 times.

Foreign exchangePakistan’s exchange reserves decreases throughout 2008. The state bank holding of foreign exchange reserve fell from $14.2 billion at 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% during March-December 2008. Most of the decrease of rupee against dollar was recorded in post November 2007. However, with the successful signing of standby arrangements with theIMF, the rupee got back some of its lost value. With substantial import compression andrevival of external inflows from abroad in the current fiscal year, the exchange rate willremain stable at Rs 80-82 per dollar.

External financingThe global crisis has restricted Pakistan’s ability to tap international debt capital marketsto raise funds. An increasing cost of borrowing internationally, coupled with deteriorationin the country’s credit rating has ruled out issuance of government paper as a financingmechanism. Pakistan’s presence in the international capital markets in 2008-09 was

limited to the repayment of Eurobond amounting to US$ 500 million made in February2009 with no new issuance at the backdrop of financial crisis engulfing the globalmarkets.

Banking sectorAccording to Fitch ratings, “the Pakistani banking system has, over the last decade,gradually evolved from a weak state-owned to a slightly improved and active privatesector motivated system. But as of end 2008, data from the banking sector confirms aslow down. As of October 2008, total deposits fell from Rs 3.77 trillion in September toRs 3.67 trillion. Provisions for losses over the same period went up from Rs 173 billion inSeptember 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 window earlier this year to address all this, andwe missed it.” The drying up of credit internationally has hit Pakistan hard with the banking system suffering a severe liquidity problem. Overnight call rates rises so muchand its ranging from 32 to 40 percent.


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Circular debtOn 26 January 2009, Raja Pervaiz Ashraf, Minister for water and power, told the senatethat the “federal government will settle half of the Rs 400 billion circular debt by the endof January.”Circular debt arises when the Government of Pakistan owes and is unable to pay billions

of rupees to oil marketing companies (OMC) an to independent power producers (IPPs).Stock marketThe Karachi stock market exchange (KSE) is Pakistan’s largest and the runniestexchange. It was the “Best performing stock market of the world for the year 2002.”Due to the global financial crisis stock market also disturbs very much. As of the last dayof December 2008 , Karachi stock exchange had a total of 653 companies listed with anaccumulated market capitalization of Rs 1.85 trillion ( $23 billion). On 26 December 2007, Karachi stock exchange, as represented by the KSE-100 index closed at 14814 points, its highest close ever, with a market capitalization of Rs 4.57 trillion ($58 billion).As of 23 January 2009, KSE-100 index stood at 4929 points with a market capitalizationof Rs 1.58 trillion ($20 billion), a loss of over 65 percent from its highest point ever.


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InflationsRising food and fuel prices have been a major source of inflationary pressure in SouthAsian countries especially Pakistan. In Pakistan, food prices mad a bigger impact oninflation than fuel, and wheat prices more than doubled, due to poor domestic productionand export restrictions. The combined effects of lower food and fuel prices along with

demand management are reducing inflationary pressure in most South Asian countries but conditions have not been that favorable in case of Pakistan.In the year 2009 core inflation rose to 18% from the 14.7% 2008. In year 2009 inflationaccelerated at rapid speed mainly because of food prices which increased as a result of high prices of widely consumable items such wheat, wheat flour , sugar and meat etc,owing to their to their supple shortage


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Economic business sector impactEconomic activity is the life blood of a nation. For a country to survive it is importantthat its economy is sound and successful and that business activity flourishes, but theglobal credit crisis and liquidity problems of many global corporations have already ledto net capital outflows from rising markets, uncertain new investment projects.

With fast depleting international reserves there is growing fear that the country may beforced into failure to pay on its foreign obligations. It was because of the fear that onOctober 6, standard and poor’s and moody’s, two of the largest rating agencies,downgraded Pakistani bonds. This has a created a terror and investors have begun to fear weathers’ Pakistan will be able to pay them back.

Impact on textile industryPakistan textile industry is facing an uncertain environment. Following few factors likeincrease in input cost of minimum wage by 50 percent, increasing interest rates, non-guaranteed energy supplies, lack of R and D and reduction in cotton production, put anegative impact on the industry’s competitiveness internationally, because of the entiresituations the companies are downsizing. Production units are being shut down and

around 5000000 of the workers lost their jobs. After surviving load shedding nowindustries have face gas load shedding this also increase their cost so that’s why our industry didn’t progress and gets into loss. When light is gone in industry it take almost30 minutes to start work again and that’s the big problem your time also waste and your cost also increasing.

Social Sector ImpactsEvery problem that enters the society has its social costs that the country has to bear.Pakistan where poverty and unemployment is much already, financial crisis increases thesituation.

Poverty and unemploymentFood prices have a large bearing on poverty rate. A review of price trends of essential

items during 2007-08 indicates that the prices of daily life such as wheat, flour, rice,edible, oil, vegetables and pulses. Since April 2007, the economy has witnessed over 200% increase in the price of palm oil; and an increase of 150% in wheat prices, whileover 100% increase in the price of oil in the international market.The government estimates that about 25% of population live below the povertyline and this average increases just because of food inflation.Economic growth has slowed down considerably during the last three years. The industryand construction sectors have contracted due to the domestic slowdown and energyshortage and also due to global recession. People are being laid-off especially fromforeign or multinational companies in order to reduce costs through downsizing. It has become even tougher for a freshman to find a suitable job than it was five years from

now. According to one estimate, Pakistan’s unemployment rate in urban areas is nearly40% and in rural areas over 60%. Increase in poverty means, decrease in averagestandard of living, poor health and education, and low-paying job, more population whichis 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 global energy crisis due to adecline in the availability of cheap oil and recommend a decreasing dependency on fossilfuel. This has led to increasing interest in alternate power/fuel research such as fuel celltechnology, hydrogen fuel, biomethanol, biodiesel, Karrick process, solar energy, tidal

energy and wind energy. To date, only hydroelectricity and nuclear power have beensignificant alternatives to fossil fuel (see Future energy development), with big ecological problems (residues and water spending). Hydrogen gas is currently produced at a netenergy loss from natural gas, which is also experiencing declining production in NorthAmerica and elsewhere. When not produced from natural gas, hydrogen still needsanother source of energy to create it, also at a loss during the process. This has led tohydrogen being regarded as a 'carrier' of energy rather than a 'source'.There have been alarming predictions by groups such as the Club of Rome that the worldwould run out of oil in the late 20th century. Although technology has made oil extractionmore efficient, the world is having to struggle to provide oil by using increasingly costlyand less productive methods such as deep sea drilling, and developing environmentally

sensitive areas such as the Arctic National Wildlife Refuge. The world's populationcontinues to grow at a quarter of a million people per day, increasing the consumption of energy. The per capita energy consumption of China, India and other developing nationscontinues to increase as the people living in these countries adopt western lifestyles. At present a small part of the world's population consumes a large part of its resources,Efficiency mechanisms such as Megawatt power can provide significantly increasedsupply. It is a term used to describe the trading of increased efficiency, usingconsumption efficiency to increase available market supply rather than by increasing plant generation capacity.

Alternate energy technologyThe Energy Minister’s statement that country will have to face the current energy crisis

for next three years shows that he is unable to alleviate the misery of average Pakistanifamily and expects them to conduct daily routine chores in extreme summer heat withouteight to sixteen hours of electricity. It brings us to: 1) Energy Minister has failed to comeup with a solution to end energy crisis including nationalization of energy sector andadoption of alternate energy. 2) Which law permits country’s rulers to enjoyuninterrupted supply of electricity 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 pockets across the countrywhile average Pakistanis face unending power rationing? Similarly, will the rulers clarifyfor the ordinary people which law allows backup generators for hundreds and thousandsof such VIPs nationwide whose number is growing by the hour? Shouldn’t the country’s

law lords be taking suo moto notices to end generator culture by unveiling number of generators being used for the VIPs, how much they cost to the national exchequer annually and which law authorizes the procurement, maintenance and fueling. There is no provision in country’s laws that authorize spending and regularization of billions of tax-rupees being wasted on the procurement, running and maintenance of these illegalgenerators.It is hoped concerned including Public Accounts Committee, citizen watch groups, legalfraternity will help country’s courts and PM to end wastage of tax dollars amidst reports


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that current 522 billion fiscal deficit will climb to 957 billion by the end of fiscal year 2007/8 and an another impending fuel prices increase before June 30. Thereby renderingimmediate borrowing of some three billion US dollar loan to sustain country’s (failing)economy. These figures, energy minister’s statement of requiring three-year gestation period for permanently ending long hours of load shedding and instead calling for

adoption of energy conservation measures mandate PMs intervention to end the misery of an average Pakistani who has been forced to face summer heat and humidity for no faultof his own and pay for national policy failure and corruption.PM to show genuine support for people’s plight and as part of austerity drive shouldordering following steps to end corruption in electricity and gas departments: 1) Inclusionof all VIP areas across the country including Islamabad into the current load sheddingschedule. 2) Across the board removal of generators and air-conditioning/heating systemsfrom govt. offices and residences to end VIP culture and save energy consumption. 3)Withdraw subsidized/free electricity/gas for public servants, office holders and govt.departments because it encourages waste and negates basic spirit of country’s IPRI Factfile law. Otherwise, also lawmakers and govt. employees as public servants cannot have

free gas and electricity paid by tax money, which is not extended to the masses. 4) Theenergy consumption of country’s domestic sector is less than total consumption of freeelectricity given to govt. sector. Therefore, PM should direct energy minister to save 500MW by withdrawing free electricity from VIPs instead of forcing load shedding atgrassroots. In fact the national leadership to set a personal example should share equalhours of load shedding if not more.Energy Minister in his statement on the floor of the house said that 50/100 MW of electricity will be generated from wind turbines. The amount reflects PPPP’s flawedenergy policy stressing on long and midterm plans thereby failing to provide immediaterelief to masses. PM should issue immediate directions to incorporate feasible alternateenergy technology based on alternate energy mapping for following reasons: 1) it can provide quick and sustainable solution for domestic sector that consumes less than 13%of total generated electricity. 2) In- step with international policy replace 20-25 percent of fossil fuel based current energy generation with alternate energy. 3) Cut fossil fuelimports to reduce foreign currency expenditure. 4) the ‘plug and play’ and main gridcompatibility of these alternate energy options can alleviate misery of masses sufferingthe heat at grassroots due to 8/16 hour protracted load shedding schedules.Therefore, it is need of the hour to permanently shift country’s domestic and agriculturesectors to alternate energy to permanently end load shedding, reduce electricity bills andcut costs on import of ever increasing fuel prices. In this regard, state of the art affordablewind turbines, solar panels, photovoltaic panels can play an important role to help realizethe objectives: 1) The ‘plug and play’ and ‘grid ready’ alternate energy technology can bring immediate relief at grassroots and end three year waiting period. 2) These alternateenergy solutions are cheaper because: (a) Due to their proximity to consumers it reducesline losses, which in turn reduces energy cost. For example, the alternate energy helps cutline losses internationally accepted standards of 5-7% against Pakistan’s reported linelosses exceeding 45 percent of total production, (independent observers put at 65%),which in turn forces per unit electricity prices increase to recover cost of lines losses andthefts.(b) It will allow energy generation at districts, tehsils and individual level, which inturn will help end corruption at all levels and cut over head costs. 3). Cheaper energy will


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promote small/medium industrial and manufacturing setups with multiple advantagesincluding generation/sustenance of millions of jobs. 4) Cheaper sustainable alternateenergy solutions will support and sustain country’s agri-sector offering criticaladvantages including 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 article ‘time for nationalized energy sector’,http://pakobserver.net/200804/17/Articles03.asp is a cheaper and with 50,000 MWgrowth potential is the sustainable way forward to end load shedding, provide relief atgrassroots and meet international standards of ‘greener earth’ as part of cleaner globalenvironment. However, it is the mindset than actual challenges in energy field that needsto be addressed as highlighted in my article ‘energy crisis and corruption nexus’ dated 7Jan. http://www.pakobserver.net/200801/07/Articles04.asp. PM need to help endcorruption and stakes blocking adoption of alternate energy to provide relief to masses,uplift agri-sector and facilitate country’s economic progress. In this regard Nawaz Sharif can play an important role by promoting adoption of alternate energy in Punjab. Themodel in turn can be copied by the rest of the country to provide relief to masses, sustain

and generate growth and jobs in country’s agri-sector. In short 4200 MW can begenerated by 1600 wind turbines with each generating of 3 MWs. The shift to alternateenergy can help Pakistan save 300 billion rupees (4.6 billion dollars) being paid in annualsubsidies to energy companies at the rate of 25 billion rupees per month. The purchase of 1600 wind turbines should cost around 0.192 billion dollars (1600 x $1,20,000 per piece)which is not only fraction of 4.6 billion dollars being currently paid under subsidy head but will also cut expenditure on import of costly furnace oil and ease pressure on foreignreserves etc. Logically, the adoption of alternate energy technology should reduce per unit cost with every passing year. All this makes sense in wake of growing oil prices.Finally, it is need of the hour to provide relief at grassroots by incorporating availablealternate energy technologies in national energy policy. It will help agri-sector and theindustrial sector can be facilitated to adopt alternate energy technology. It will helpreduce expenditure on fuel imports and foreign reserve.The nationalization of energy sector and adoption of alternation energy technology cango hand in hand with already approved long and medium term policies and projects basedon traditional resources of energy generation.

Pakistan's energy crisis: short and long-term solutionsPakistan is in the grip of a serious energy crisis that is affecting all sectors of theeconomy and the various segments of the society. As the situation stands to-day, there arehardly any immediate solutions to resolve the issue. A change of attitude and a change of life style is needed at the national level which should be triggered by the ruling elite andfollowed by all segments of the society that have access to electricity. At best there could

be some short and long-term solutions to the crisis but they need immediate planning andexecution with an enormous investment. None of the previous rulers of the countrysolved the issue due to which the energy crisis kept on increasing regularly.


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State of energy resourcesPakistan has a deficit of fossils or hydrocarbons sources of energy and to cover up thedeficit, it depends upon importing crude oil at an enormous cost from its meager forexreserves. The need of crude oil is on an increase because of an improved life style whichhas necessitated the use of vehicles and cars for transportation. Import of oil at around

$110 per barrel, increases the trade deficit and the current account deficit. It makes fiscalmanagement a difficult task which affects the government as well as the people.Contrary to the deficit of fossils or hydrocarbon resources, Pakistan is rich in hydroresources of energy. According to an estimate the country has enough resources togenerate approximately 40000 mw of hydro-electricity. However, presently it onlygenerates 8000 mw of electricity against an installed capacity of 11327 mw. In additionthe country can generate electricity with the help of wind and solar energy which has notyet been exploited to meet the energy deficit. Nuclear energy is yet another source of energy and at present PAEC produces 472 mw. It is far less than what PAEC should have been producing to meet the energy deficit.Three major electricity generation agencies presently operate in the country. 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), 5977mw. PAEC produces 472 mw as stated earlier. Thermal power accounts for 64 per cent of the total installed capacity, hydro-electricity accounts for 33 per cent and nuclear power plants account for 3 per cent. Thermal power is mostly produced by burning either natural gas or imported oil. The country is yet to switch over to coal from the indigenoussource of energy that is estimated to be the third largest in the world with 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 kept changing. According to an analysis, in thefiscal year 1990-91 hydropower accounted for 45 per cent of all electricity produced in

the country but it was reduced to 26 per cent with a 10-year period. The share of thermally generated electricity increased from 54 per cent to 71 per cent during the same period. Needs of most of the commercially used oil are met by imports whose prices haveskyrocketed during past five years and as such the cost of power generation through oilhas increased.Power consumption because of increasing needs of industry, agriculture and householdshas been on the rise. According to an estimate, between the period of 1990 and 2003 thetotal consumption increased by 84 per cent, from 31twh to 57twh. Presently, an annualaverage increase of 7 per cent has been postulated. The energy sector, in which thegovernment has a greater role to play, will have to work hard to make up for the existingdeficit and to meet the growing demand.


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The reason behind the crisisAn important question in the midst of ongoing power shortage crisis, being raised is thatwhy the energy crisis looms on our head after an interval of around 10-15 years despitethe fact that statistics about energy resources, demand and consumption are wellarticulated. They are also readily available to planning commission and other federal and

provincial governments. The answer is simple; poor management, lopsided priorities andlack of accountability on part of those who stay at the helm of affairs.In the early 90s, the power crisis had started emerging and the political government thatwas mandated to govern the country was faced with the issue of power crisis. Thegovernment had to resolve the crisis by engaging almost 19 Independent Power Producers (IPP). 19 IPP projects were initiated with an installed capacity of 3158 mw andinvestment of $4.0 billion and by March 2003 the installed capacity was at 2728 mw thathas reached to 5977 mw through expansion. Till 2005, supply of electricity producedthrough different power generating units was surplus to demand by around 450 mw butsince then demand has been outstripping supply because there was practically noadditional power generation.

The government did not anticipate that there would be an increase in demand of electricity and it was its responsibility to arrange the supply according to the demand.Consequently, during summer, 2007, supply of electricity ran short of 2500 mw. It is being anticipated that this year the deficit between supply and demand could be as highas 3000 mw. By the end of year 2010, the deficit could be as large as 5500 mw. There areno immediate solutions to generating additional power through any source because a unittakes at least 2-3years to establish properly. More than 5 years is required to construct ahydroelectric dam and the investment is enormous. This crisis has literally paralysed theconstruction industry, badly affected agriculture and made life hell for the citizens. Inview of existing ground realities and constraints to address power crisis by generatingelectricity within a short span of a few months, the need to make the best use of existing

power generation by taking conservation measures at individual, community and nationallevel are essential. These measures if implemented with commitment and honesty of purpose can help a lot of people to over come negative implications of power crisis.

Energy conservation measuresEnergy conservation or efficient use of electricity is what is needed at this crucial time.There are three major users of electricity and they need to be educated and motivated to play their role in energy conservation. The three stakeholders are: industrial sector,transport sector and domestic/household sector. Each sector needs to be dealt separatelyto high light the efficacy of conserving energy.The Industrial sector is consuming the largest amount of energy in the country. Itconsumes around 45 per cent of the total commercial energy. Most of them are

concentrated in a few industrial areas close to or within large cities such as Karachi,Lahore and other comparatively smaller cities. Industrial units are not energy efficientand management practices also need improvement to make efficient use of electricity. Astudy carried out by the ENERCON reveals that efficient use of electricity by theindustrial sector could save up to 23 per cent of electricity. The focus on energyconservation is on the improvement of steam distribution systems, air conditioning,refrigeration and modernizing and revamping energy efficient combustion processes andcontrols.


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The transport sector is the second largest consumer of energy. According to anENERCON study, this sector consumes 28 per cent of total national consumption of energy. This could be reduced by 10 per cent if car owners alone were to economise onconsumption of fuel and kept their car engines fully tuned up. The sector has the potentialto be 20 per cent energy-efficient if railways, shipping and aviation are included. One of

the visible constraints that keeps the industrial and transport sector away from beingenergy-efficient is the lack of observing energy conservation rules and regulations whichare already laid down by the government. Their focus is perhaps on short-term gains thatrun contrary to national interest.The third largest consumer of electricity is domestic/household sector that consumesaround 21 per cent of electricity produced in the country. According to a study this sector could be efficient by 30 per cent by avoiding wasteful habits of consuming energy suchas keeping markets fully lit etc. A positive development that has so far taken place in thissector is gradual shifting over to use of energy savers. Similarly energy could be saved byminimum use of air conditioners. The entire household should be well-aware of energyconsumption.

To achieve meaningful results about conservation of energy the charity should start fromhome, that is, the ruling elite should take the initiative and set example to conserveenergy as a national imperative for emulation by other segments of the society. If conservation measures stated above were to be implemented partially, it would go a longway in addressing the energy crisis immediately without any additional cost.

Measures by the governmentThe outgoing government had belatedly addressed the power crisis by hyping up theconstruction of mega hydro-electric dams including politically controversial Kalabaghdam without going into details about their feasibility and sources of investment. The newgovernment has a real big challenge of addressing the energy crisis at hand. Its first priority should be to implement immediate measures that might bring some relief to the

public. It should also immediately embark upon the programmed of expansion of generating capacities that has been laid down by the previous government under “Vision2025” programIt envisions increasing existing power generating capacity by 10000 mw by 2010 andaround 35000 mw by 2025 at an enormous cost of $35 billion to be shared by thegovernment and private sector. The share of different sources of energy is stipulated to beas follows: hydro-electricity: 22563 mw, new gas fired plants: 4680 mw, coal fired plants: 4350 mw, nuclear plants: 1800 mw and finally 1500 mw from renewable energyresources. It is certainly an ambitious plan that needs to be implemented on priority basiswith changes that the new government might like to make within its national policyframework.

Hypothesis FormulationHo due to water shortage.H1 other causes.


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ConclusionIt hardly needs to be emphasized that electricity is the lifeline of national economy andthe people at large. The Economy and public life practically come to a halt because of theload shedding. The existing crisis can be addressed by the government by taking promptmeasures. There is hardly any room for neglect or delay.


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ReferencesAqeel, A., and M. S. Butt (2001) the Relationship between Energy Consumption andEconomic Growth in Pakistan.Asafu-Adjaye (2000) The Relationship between Energy Consumption, Energy Prices andEconomic Growth: Time Series Evidence from Asain Developing Countries.

Banerjee, A., J. Dolando, J. Galbraith, and D. F. Hendry (1993) Co-integration,Error Correction, and the Econometric Analysis of Non-stationary Data. OxfordUniversity Press.Barro, R. J., and X. Sala-i-Martin (1995) Economic Growth. New York: McGrawHill, International Edition.Bashar, Amanullah (2000) Pakistan Energy Conference—Special Report. PakistanChandler, W., and H. Gwin (2003) Helping China Manage Energy Growth.[downloaded from internet].Dornbusch, R. (1992) The Case for Trade Liberalisation in Developing Countries.Journal of Economic Perspectives 6, (Winter), 69–85.Ebinger, C. K. (1981) Pakistan: Energy Planning in a Strategic Vortex.

Bloomington, USA: Indiana University Press. New York: McGraw Hill, International Edition, USA.Rehana Siddiqui 200 Kemal, A. R. and S. I. Ahmad (1992) The Sources of EconomicGrowth in Pakistan. Study prepared for the Ninth Five-Year Plan. Pakistan Institute of DevelopmentEconomics, Islamabad. (May).Kemal, A. R. (1999) Privatisation in Pakistan—Social Effects and Restructuring.Pakistan Institute of Development Economics, Islamabad. (September).(Unpublished paper.)

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report on enrgy crises

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