Raza Hameed

English

Research Papers in Economics

The Pakistan Development Review 
47 : 4 Part II (Winter 2008) pp. 1029–1033      
Demand and Supply Issue (2008-2009)  
RAZA HAMEED
*  
Total demand (peak season) = 22,000 MW 
Today’s power generation peak season  
Hydel / 6000 MW + IPP’s/10,000 MW + Wapda thermal stations/3,000 MW = 19,000 
MW.  
In 1994 our major source of power was hydel. Cost of hydel is only in the 
beginning which includes construction of dam and water reservoir. It is the cheapest 
source with no input cost and very low administrative cost .It is the best natural way 
of  producing  energy.  No  noise,  no  pollution  and  many  associated  benefits.  This 
source  cost  wapda  less  than  Rs1  per  unit.   In  1994  IPPs  came  into  action  using 
thermal power generators running on diesel. After purchasing electricity from IPPs 
the purchase price of Wapda increased up to Rs 6 and 12 per unit depending on the 
deals with different IPPs.  This method proved to be very costly and full of pollution.  
Due to price hike of diesel in the past, the input cost (cost of diesel) increased by 
many fold.  So the economy was hit and the balance of payment was disturbed badly.  
Actually  this  method  was  meant  for  short  term  solution.  But  due  to  political 
instability we lost our sight from the real scene and based our future energy plan on a 
very costly method. Why?  Answer is, as a nation including politicians, bureaucrats, 
policy makers and everybody enjoy their present leaving and passing these queries, 
fears and problems to the next generation hoping that all will be well. More than 35 
years  past  away  and  no  concrete  solution  appeared.  But  the  people  of  Pakistan 
specially our new generation are facing this bitter truth i.e., load shedding 
We have lost rather wasted our precious 35 years. We cannot makeup this gap. 
Whenever we will try to make a deal with the foreign investors regarding any power 
generation project,  it will always be unfair.  unfair  why?    Because, when  somebody 
knows that you are dying for what he has, he will blackmail you and make u go his way. 
This is called business. We have lost both the time and competitiveness.   If we go on 
making deals with IPPs now known as “Rental power houses” which will provide us 
electricity as high as Rs19 per unit.   We will lose a lot in all fields. Such as: 
(1)  Government will have to subsidise more and thus budget deficit will increase.     
(2)  Cost of production will be increased therefore our exports will decrease.  
Raza Hameed is Specialist, Small Cottage Industries, Gujranwala. Raza Hameed  1030
 
(3)  Cost of living will increase. 
(4)  The above three points will lead to  poverty, black marketing, labour lay off  
and ultimately to corruption, bribery, electricity theft, gas theft etc.  
HOW TO OVERCOME THE IMPACT OF INSUFFICIENT POWER 
There are two measures to overcome the energy crises i.e. “load shedding”.  
(1)  Long term measures.  
(2)  Short term or prompt measures.  
1(a) New Dams Should Be Build  
This is the only way to get the cheapest electricity .Moreover, only dams can 
reverse the ratio to 60 percent hydel and 40 percent ( thermal, coal and others).  
1(b) Coal Power Generation 
Pakistan has sufficient coal reserves. The share of coal power generation in the 
total energy used by America and China is more than 50 percent.  It is cheaper than the 
thermal power generation.  
1(c) Solar Energy 
The climate of Pakistan fully supports this source of producing energy. But it is 
very costly. This method has no input cost but high maintenance cost.  
1(d) Wind Energy 
In some areas this is also workable. This is also cheap energy with no input cost 
depending upon nature.  
2 (a) Education Through Electronic Media 
Media  can play a vital role in educating people to save energy. People should be 
educated to use energy for convenience but without wasting it. Hotels, CNG Stations, 
Commercial plazas can be educated  to use 50 percent energy for lighting .In this was gap 
of supply and demand of electricity can be narrowed   and people will save   a lot of 
money.  
2(b) Increase the Electricity Rates 
If people don’t respond to the slogan “save electricity and save your money and 
future”. Then, rates of electricity should be increased to make people think seriously to 
save  energy.  In  this  way  government  expenses  regarding  subsidizing  the  people  will 
decrease.  
2 (c) Measures to Stop Leakages and Electricity Theft 
Strict measures should be taken to stop leakages and theft of electricity and gas as 
well. Line loses of electricity power companies vary from 15 percent to 25 percent which Demand and Supply Issue  1031
 
is actually electricity theft.   Saving of energy is equalant to any source that can generate 
energy.   More over saved energy is free energy. Because no cost of installation and 
production is required to save energy.  Only good policies and good people can make this 
happen.  Sincere  and  continuous  efforts  can  save  us  energy  more  than  produced  by 
Tarbaila or Mangla Dam.  
IMPACT OF POWER CRISES 
Due to power shortage both the civic life and industrial sector of Pakistan are 
badly disturbed. In 2007, due to unscheduled load shedding all sectors such as hospitals, 
schools,  colleges,  homes  were  effected.Effeciency  of  the  institutions  reduced  by  40 
percent.   More over, more time was wasted for  little works. Tension and depression 
spread wide over which weakened the social values of the people. 
In case of industry, the first thing is loss of production and decrease in quality 
standards. Due to unscheduled Load Shedding the tempo of production is not achieved 
and there is higher ratio of rejected goods. This loss of quality and quantity lead to delay 
in export orders.   Secondly, low productions leads to higher cost of production.   So 
during Load Shedding, goods produced will be more costly and thus competitiveness in 
the international market will be lost.  Exports will decrease and country will be earning 
less foreign exchange.  
Thirdly due to loss of production prices of commodities in the local markets 
will  increase.   Black  marketing  is  other  phenomena  that  occur  due  to  this  price 
increase.  Artificial shortage is produced    and people are forced to buy the essential 
goods at very high rates.  Many businessmen earn high profits under the umbrella of 
artificial shortage.  These entire factors push the economy to high inflation era.  Then 
it  is  very  difficult  to  control  the  economy  of  the  country  by  using  any  fiscal  or 
monetary policy measures.      
GENERATORS: THE ONLY PRIVATE SOLUTION TO POWER SHORTAGE 
Government of Pakistan has allowed great industries to build their own power 
houses and generate energy by using diesel and gas.   This is short term solution for 
private and industrial sector. The cost of electricity produced is high and varying all the 
time. 
In  2007-2008  every  big  and  small  industry,  CNG  stations,  petrol  pumps, 
hospitals and hotels, banks and commercial plazas, offices and homes etc installed 
generators  for  smooth  running  of  their  businesses,  services,  and  works.   Actually 
people  of  Pakistan    were  compelled  to  buy  the  generators  and  thus  country’s 
precious  foreign  exchange  worth  millions  of  dollars  was  wasted  for  nothing.  
Generator industry is becoming another big private industry of Pakistan.   Hundreds 
of  families  are  earning  their  livelihoods  from  this  industry.   This  industry  has 
emerged  only  due  to  worst  planning.  How  it  happened?   When  government  of 
Pakistan  showed  no  interest  to  pay  long  awaited  dues  to  IPPs,  they  stopped 
generating power at full capacity.  As a result people of Pakistan suffered alot. They 
faced social problems and also suffered losses in their businesses. Pakistanis waited 
and then suddenly started buying generators for private power generation.  Question 
is who is responsible for this change? Raza Hameed  1032
 
To run these generators purchased privately by the people of Pakistan, more gas 
more petrol and more diesel is required .So import of diesel increased. The petrol pumps 
which were running in losses started earning profits by selling diesel and petrol to the 
users of generators. 
It was better to pay to the IPPs to have energy at full capacity rather forcing the 
people of Pakistan to work out their own power plans.    Our country could have saved 
millions of dollars in this regard if better planning was done.       
Benefits of Generators 
(a)  No more loss of production. 
(b) Quality of production is maintained. 
(c)  Exports are not delayed. 
(d) Efficiency is maintained. 
(e)  Trained labour never quit.   
Cost of Using Generators 
Decrease in Profits 
A recent survey of 150 CNGs in Gujranwala city clearly showed that the use of 
generators increased the earnings of the CNG owner’s.  Secondly it is also clear that by 
using generators 5 percent of total cost is increased as compare to the period when station 
was running only on electricity. It also showed that use of generator decreases the net 
profit of CNG owner by 25 percent. 
In another survey of 30 units of power looms industry in Gujranwala showed 
approximately  the  same  results.   A  very  interesting  feature was found.   Because 
this  is  a  small  cottage  industry,  entrepreneurs  hesitate  to  buy  generators.   They 
prefer to install more machinery.  More machinery in lesser period of time maintain 
the same level of production.  But the labour is not happy their wages are based on 
per piece or per yard formula .So they quit that industry and go to the one which 
has generator.  Moreover in order to maintain production labour is forced to work 7 
days a week.  
Increase in Pollution 
Use of generators in factories, homes, shops etc. will pollutes our atmosphere and 
there will be noise of engines and smoke everywhere.    
DEMAND AND SUPPLY ISSUES  
Causes of Demand Increase? 
(1)  Rise in Agricultural Demand 
The upward trend of diesel prices motivated the farmers to use electric motors in 
their tube wells rather using peter engines. Agriculture demand increased from  percent to 
7 percent of the total usage in the last 5 years. Demand and Supply Issue  1033
 
CNG Industry (New Arrival) 
In the last 10 years CNG industry has emerged as an important industry of energy 
sector. It has reduced country’s reliance on petrol which had a major share in import bill. 
More than 2800 CNG stations are in service to provide fuel to more than 80 percent of 
private vehicles in Pakistan public vehicles like Toyotas are also converting to CNG 
rapidly. On average one CNG station use 40000 units of electricity per month as compare 
to a petrol pump of double size which consumes only 4000 units per month.  
Social Impact  
In the past people of Pakistan lived in the form of big families. Now trend is 
changing. One home and one family is the common slogan. More houses, colonies are 
being built. More people love to go for shopping so new shops and shopping malls can be 
seen in all parts of big cities. People like to eat food in restaurants at least once a month, 
so we can see many kinds of food chains, restaurants and hotels .All need electricity so 
usage is increased in commercial areas as well.  
Luxurious Life Style 
Today,  Families  like  to  have  separate  bed  rooms  for  each  member.  More  air 
conditioners are being installed. In the past, one family had only one big room where all 
family members used to sleep. That was economical and loving .But now every family 
member  runs    AC  in  his  separate  room.  That  trend  has  created  a  big  demand  for 
electricity.  
Increase in Population 
Although it is first case of increase in the demand of electricity. But actually the 
use of electricity is mostly governed by the life style of the people. On the basis of 
population, 10 percent per anum increase of new electricity connections was observed.     
Lack of Peace and Security 
In Pakistan people don’t feel secure even when they are in their homes. In the past, 
all rich and poor families use to sleep outside in the courtyard or lawn of the house with 
one or two fans working. But due to the risk of being looted or killed, people prefer to 
sleep in their locker rooms where air conditioners are necessary. This trend has also led to 
very high usage of electricity.  
Bank Financing 
People  dream  and  want  to  live  a  luxurious  life.  Banks  made  it  possible  for 
everybody  by  financing  houses,  cars,  households  and  other  accessories.  The  slogan 
“Every thing for everyone” created a big economic activity. Use of electricity, petrol and 
diesel increased by many folds .But in the end, people lost everything in this chase. 

Demand and Supply Issue (2008-2009)

http://www.pide.org.pk/pdf/PDR/2008/Volume4/1029-1033.pdf

Demand and Supply Issue (2008-2009)

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics