Lahore, August 12, 2015 (PPI-OT):Present energy shortage is leading to “Gen-set Economy”. It was stated by President Pak-China Joint Chamber of Commerce and Industry, Shah Faisal Afridi. He said that power shortage has made the manufacturing sector of Pakistan dependent to the Generators and self generation of electricity has raised the cost of production due to the increased import bill of furnace oil and the machinery used for alternative source of electricity. “With the every import bill rise, the economy faces imbalance in trade”, added Afridi.
He said that according to some official reports the country paid a total of $6.69 billion for the import of petroleum products and furnace oil during the July-Nov 2014-15. The amount was higher than the import bill of the same period last year which was around $6.43bn. He informed that the Import bill of power generating machinery also rose by 50 percent this year as compared to the last year.
He mentioned that import bill of power generating machinery stood at $283.706 million at the end of first quarter of FY 15 registering 49.83 percent increase over the import bill of $189.351 million in same period of FY 14.”Government was continuously claiming addition of significant electricity in national grid during last year, but the statistics indicate that industries are still struggling to prevail over energy shortened related worries.
He said that manufacturers are left with no other option than development of own sources of energy supply through investment in generators. The case for such investment becomes greater the larger the time losses due to outages and the stronger the expectation that relatively high levels of power interruptions will persist in the long run, he added.
He elaborated that, 75 percent of the total manufacturing units, have gone in for self -generation during outages by investment in stand – by generating capacity. Industries with a relatively high proportion of firms with generators are chemicals, petrochemicals, machinery and equipment.
He explicated that the average cost of self-generation is almost two and a half times more than this, i.e. Rs. 19.85 per Kwh implying that self generation costs an extra Rs. 11.91 per Kwh. Therefore the extra cost to the industrial sector due to self -generation of electricity is about Rs. 32 billion. This is also the extent to which profitability of firms is lower because of load shedding.
He further highlighted that in order to generate sufficient electricity to avoid hampered production a manufacturer has to compromise on the value addition of his product. Therefore, Outages in the industrial sector also impedes economic activity in other sectors of the national economy like wholesale and retail trade, transport and communications, banking and insurance, etc.
He said that High cost of utilities is also making Pakistani products uneconomical in the international market. The cost of production has increased as industrialists have to spend more money on alternative sources of energy. He further pointed out that the country’s biggest industry, the largest employer and accounting for more than 60 percent of overall exports, the Textile industry has recorded a 10.2 percent decline in output according to recent reports.
“The LSM sector has also been badly affected during the last four years, owing to high cost of credit and higher interest rate regime in Pakistan; he said that after the energy crisis, the high interest rate regime is the second biggest setback to industrial growth in the country.
For more information, contact:
Wardah Ali Gohar
Pakistan China Joint Chamber of Commerce and Industry (PCJCCI)
Mega Tower, 309 – 6th Floor,
Main Boulevard, Gulberg II,
Lahore, Punjab – Pakistan
Tel: +92-42-35777460-02, +92-42-37032203, +92-42-35874353