When a new CEO assumes office of an ailing company, the focus usually is to bring efficiencies in the system before committing major investment. That should be the motive of next government through lowering the import bill by bringing discipline in energy and agriculture systems along with requisite investment in indigenous resources.
“Overall energy savings potential in Pakistan in FY2008 is estimated to be 11.16 MTOE (493,304 TJ), inclusive of savings in end uses as well as energy transformation. These savings correspond to 17.7% of the annual primary energy demand of 62.92 MTOE (2,780,941 TJ).”, pointed out by an ADB report published in 2009.
This 11 MTOE turns out at an import bill of around $5 billion at today’s prices. Since the energy consumption increased substantially in the last decade, the overall savings today could be easily north of $5 billion. Apart from that, there are savings by switching to indigenous fuel and renewable. Curtailment of other imported items through import substitution can enlarge the savings further.
Petroleum imports stood at $12.2 billion in 11MFY18 while the imported coal number is excluded which must be hovering around $1billon. This takes the number to $13.2 billion in 11MFY18 which is annualized at $14.4 billion.
The saving potential is nothing less than $5 billion per annum by primarily bringing efficiencies on both demand and supply sides. These savings can be extracted by deploying energy conservative solutions along with improvement in power generation, transmission and distribution.
The reliance on indigenous energy resources, especially renewable can bring not only additional import savings but help in resolving fiscal deficit which is touching 7 percent of GDP in FY18. The wind energy potential is huge in Sindh and Balochistan while the technology is improving day by day amid the cost of production is reducing. The solar panels should be on every roof top with a concept of rent a roof which is prevalent in India while agriculture should be using bio and other waste to produce energy at farms. And the list goes on.
Pakistan is a poor country and it should not be rely on expensive energy and other infrastructure to move up the development ladder; as such expansions, especially by government, fuel in the twin deficit problem. That is exactly what is happening today; the PMLN government came with mega energy projects without delving into soft reforms whereas the cost of savings in former is relatively low.
Yes, there are benefits from mega projects such but nothing was done to lower the line losses; nothing substantial was done to explore the wind corridors and the list goes on. Focus of the new government should be on energy efficiencies to reduce the energy import bill by $5-7 billion per annum in five years.
That is one leg of the story. Pakistan being an agrarian economy is importing more food and other agriculture produces than exporting them. We should look at areas to reduce our food and other agri product imports. For instance, in 11MFY18, the country imported over one billion dollar of raw cotton. The sugar mafia through its political influence paved way to grow more water intensive sugar cane at the expense of exporting commodity cotton. The balance should be reverted back towards growing cotton.
Pakistan is a net food importer; the equation should be flipped to benefit from the huge agriculture base. The focus should be on better use of water, seeds and other inputs to enhance yields and to explore new crops. Bringing efficiencies in the system by having minimal investment can reduce the import bill by around $10 billion per annum.
It’s easier said than done. And this may take time; the new government reform agenda should revolve around lowering the cost of energy and agriculture produce to not only to lower cost of domestic economy but also to reduce the import strain.
The last PMLN government should have focused more on lowering imported fuel costs solutions. The next government needs to focus on domestic economy and solely work on bringing efficiencies. The economic competitiveness will improve and exports would be a natural consequence.
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