Introduction:The ongoing energy crisis has crippled Pakistan’s industry and economy. Aconservative estimate puts the loss to industry at 13% of total manufacturing salesor nearly Rs. 130 billion per annum. The energy crisis is hitting the industry atmultiple levels: energy tariff increases are forcing businesses with low margins andthose who are unable to generate their own power (e.g., SMEs) to close down;unannounced load-shedding and voltage fluctuations damage machinery worthmillions of dollars; unavailability of electricity harms productivity of workforce.With an abundance of two of the cheapest sources of energy in the country, there isno reason why Pakistan should not be able to overcome this crisis soon.To overcome this crisis The Ministry of Industries & Production should stronglyadvocate the following:• As long as power shortfall remains, load needs to be managed carefully. Areaswith a heavy presence of industry, both large-scale and SMEs, should be giventhe status of industrial corridors. These corridors could be given separatefeeders, where load shedding will only occur when absolutely necessary2. Thisneeds to be finalized in consultation with PEPCO so that the presentsuboptimal matching of grid stations and 11kv feeders can also be addressed.Load-shedding schedules for such units need to be announced at least 2 monthsin advance and load shedding days should be clustered for both electricity andgas. No such priority should be given to industry that is based in residentialareas.• Conduct sector-wide energy audits, initiating the programme from heavy loadindustries. Based on the recommendations of the audit, provide incentives tothe industry to shift toward more energy efficient production methods andtechnology.• In the industrial corridors, peak-load pricing schedules should be announced.2 This point is also addressed in the section on Industrial Estates and other special economic zones.

12

• In the medium to long-run, we strongly propose a shift in energy mix. This maybe helped by developing localized, cheaper machinery for hydel, thermal andcoal-based power plants. For this purpose, the interaction of manufacturers andpower producers, including WAPDA needs to be facilitated to developmachinery best suited to Pakistan’s needs.• In special economic zones, science park and industrial estates, captive powergeneration should be allowed.• At the same time, steps should be taken to facilitate the local development ofwind turbines and solar energy technology. For this purpose, two pilot researchprojects should be initiated bringing together universities, industry, foreign andlocal experts and relevant government departments.

D. Upgrading Logistical InfrastructureAn efficient and well integrated transport system is integral to the growth anddevelopment of the industry as it creates access to markets, reduces the costs ofproduction and increases the competitiveness of firms. In Pakistan, however, thetransport systems suffer from insufficient investments, poor management and a lackof essential maintenance. The low reliability and high costs of the transport sectorhinders Pakistan’s economic growth by reducing the productivity of its industry andcompetitiveness of its exports. The cost of transport system inefficiencies has beenestimated at about 4%-6% of the GDP.In order to increase the efficiency of logistics in the country, The Ministry of Industries& Production should strongly advocate the following measures:ROADS & TRUCKING• In partnership with the private sector international standard Logistical Parksnear industrial areas, agricultural hubs, and ports need to be setup. For thispurpose, land needs to be provided, and government should invite local/foreigninvestors to develop facilities for storage, loading-unloading facilities, and rest13

areas. Dry ports should be established within or adjacent to these logisticalparks.• Vehicle quality testing stations and Radio Frequency Identification (RFID)based tracking facility should be established within the logistical parks.• A roads commission should be set up to develop the overall strategy for roadsgiving priority to areas with relatively low connectivity. It would include in itspurview connecting roads to major industrial estates, railways and border pointsas well as connectivity with Baluchistan and tribal areas.• The government should standardize and provide technical advice, licensing andregistration of trailers.• The government should ensure the creation of cold storage facilities nearagricultural hubs and expedite the creation of cold chains from agro-basedclusters to Karachi.RAILWAYS• The condition and performance of Pakistan Railways needs to be improvedsignificantly. New investment is required in the Railway Freight Service and newtracks need to be laid in order to support transportation within the country.• It is proposed to increase the share of national railway in national freight fromthe current 4% to 22% by 2030 as proposed in Vision 2030.PORTS• Pakistan Automated Customs Clearance System should be maintained and thesoftware issues need to be solved immediately.• The government needs to facilitate the private sector to invest in bulk handlingport facility. This could be done through public-private partnerships byfollowing the ‘landlord concept’ employed successfully in the Karachi PortTerminal.• The government should facilitate the establishment of silos at Karachi port forthe storage of commodities such as coal and cement.14The Case of Gawadar:Gawadar is located in Baluchistan whose strategic location needs to beexploited. It is east of Iran, south of Afghanistan, and boasts a sea port almost at

the mouth of the Strait of Hormuz. Gawadar is an essential node in the Iran-Pakistan-India pipeline, which could cross from Iranian to PakistaniBalochistan. At the same time, Gawadar is of enormous strategic importance toChina, Afghanistan, Iran and Central Asia. However, the development andusage of the Gawadar Port has stalled as a consequence of a myriad of issuesranging from lack of infrastructure investment by the government, prohibitivelyhigh cost of transportation, security issues, absence of any significant industry inBaluchistan, and foreign interests which feel threatened by this development.Accordingly, the following policy recommendations are given:• Scrap the deal with PSA and seek assistance from China in developingthe port.• Urgently complete road works linking Gawadar to upcountry.Currently, transporters have to go through Sukkur.• Incentivize China and/or UAE to build oil refineries near the port.• Seek Chinese assistance in building a rail link between Gawadar andnorthern parts of the country.

E. Promotion of Knowledge-based Industriesthrough a Full-Scale Science ParkA cornerstone of this industrial policy is the establishment of a science park in Pakistan.The proposed science park will have formal operational links with one or moreuniversities, research centers, or other institutions of higher education. It will bedesigned to encourage the formation and growth of knowledge- based industries. It willhave all the infrastructure required to attract professionals, consultants and managersand will house organizations ranging from R&D to manufacturing, marketing andbranding. In short, the objectives of the establishment of a science & technology parkin Pakistan are the promotion of technology commercialization, transfer and diffusion15by fostering links between Industry and universities, R&D labs, and promoting theformation and growth of knowledge-based companies.

A science park fulfils several purposes that are critical to the success of the 2010industrial policy. Most importantly, it enjoys the status of an R&D establishment,which means it sidesteps the same WTO regulations that prohibit any subsidies to localorganizations. Local organizations can be encouraged to indigenize through collectivegovernment sponsored R&D and build brands within a science park.Second, a science park captures the entire product cycle, rather than just focusing onmanufacturing. It provides incubators for scientific innovations as well as a productioncenter for cutting-edge products. Universities will be playing a very strong role in theemergence of the proposed science park and will be required to supply trained humanresource and a knowledge base for industrial innovation.Third, a science park provides economies of scale and scope with respect to commoninfrastructure facilities (such as transport, power, information and communicationtechnology connectivity, office and production space, and waste treatment) andtechnical services (such as recruitment, training, mentoring, financing, networking, andlegal and IPR consulting).Finally, through delegation of powers to the science park level, various ministries andgovernment bodies can achieve coordination, a goal that otherwise remains difficult toachieve.The aim is to create an environment where knowledge-based industries can thrive andthe required professionals can reside with their families. We envisage the park projectto be 6-year long with approximately US $500 million required in startup costs. Thetotal area for the park will be about 200 hectares. The project will be executed in 3phases. Phase 1 will include the survey of different sites in Pakistan for the park and theselection of the most suitable site. The 2nd phase will include building the infrastructureas well as building and recruiting park clients. The last phase will include facilitating the16

investment environment for the clients and building bridges between differentuniversities of Pakistan, R&D institutes and park clients.The government of Pakistan will incentivize the investment environment in thescience park through the following measures:• Absorb initial startup costs for the science park• Provide infrastructure of the park including amenities• Establish venture capital funding for startups• Provide five year tax holiday• Ensure industrial laws and regulations simplification• Ensure delegation of power from several other government agencies to parkadministration for ‘one stop operation’• Pass special commerce and tax laws for science park operation• Ensure cooperation programs among universities, research institutes and parkclients• Provide transparent, competitive R&D grants

Development of Industrial Estates, SpecialEconomic Zones, Export Promotion ZonesThe following is proposed in this respect:• To promote the growth of existing and resource-based industries thegovernment should create industrial estates and agro processing zones at theidentified ‘hot spots’ of economic activity. This should be done while preservingagricultural lands and observing municipal zoning laws.• The government should develop these estates through the provision ofnecessary soft and hard infrastructure and world class logistic facilities.• The government should facilitate estates and zones in:o Accessing appropriate technology.o Obtaining information about modern methods of production.o Improving quality standards such as phyto-sanitary measures foragriculture processing.o Product branding and up gradation.o Accessing international markets.17• This should be done by creating linkages with universities, research centresavailable locally and internationally, and by creation of centres of excellence.• Captive power generation should be permitted at the estate level.

• Effluent Treatment Plants and Solid Waste dumping sites should be establishedin all industrial estates. Incentives such as tax break should be provided for localconstruction/fabrication of effluent treatment plants.• With falling duties, the attraction of EPZs (where imports are duty free) hasfallen dramatically. EPZ such as the one in Gujranwala should be turned intoan industrial zone.• The government should rationalize its existing portfolio of industrial estates.The failed estates or SEZs (e.g., Gadoon) need to be liquidated and lessonslearned from their failures. Sukkur Small Industrial Estate should be developed.• Business incubators for SMEs should be set up to reduce costs for business startups.

. What Constitutes an Energy Crisis?

Energy crisis is a situation in which the nation suffers from a disruption of energy supplies (in our case, oil) accompanied by rapidly increasing energy prices that threaten economic and national security. The threat to economic security is represented by the possibility of declining economic growth, increasing inflation, rising unemployment, and losing billions of dollars in investment. The threat to national security is represented by the inability of the US government to exercise various foreign policy options, especially in regard to countries with substantial oil reserves. For example, the recent disruption of Venezuelan oil supplies may limit the US policy options toward Iraq.

Looking at the two energy crises of 1973 and 1979, we find some common elements between the two. Both events:

1. started with political turmoil in some of the oil producing countries. 2. were associated with low oil stocks. 3. were associated with high import concentration from a small number of suppliers. 4. were associated with declining US petroleum production. 5. were associated with high dependency on oil imports. 6. were associated with low level of oil industry spending 7. led to speculation 8. caused an economic downturn 9. limited US policy options in the Middle East

The same indicators and warning signs that existed prior to the energy crises of 1973 and 1979 exist today: a political crisis in Venezuela that halted most of the Venezuelan oil exports, the threat of war with Iraq, stocks at their lowest level in twenty six years, imports nearly record high, more concentrated imports than ever, and low

upstream expenditures. However, the current problem is even worse than the previous two energy crises because, unlike the 1970s, we are starting from a case of low economic growth. The massive stimulus package that is planned by the Bush administration could exacerbate the situation by increasing the demand for oil.

Some experts argued in 2000 that the US was heading for an energy crisis at that time. Although the crisis did not happen because not all the warning signs existed at that time, the current situation is much worse because US production is lower, import dependency and import concentration are higher, and world excess capacity is lower and matches that of the 1973 crisis.. Measures of Energy Security

There are five principal measures in evaluating petroleum security from a national perspective: domestic production capacity, dependence on imports, the degree of import concentration, petroleum inventory relative to imports, and the ability to second source petroleum imports in the event of an interruption from one or more suppliers.

1. Domestic Production Capacity

US oil production is currently at a record low and has been steadily declining since 1986 as shown in Figure (1). Although the US oil production reached its peak in the 1970s, the increased production in the second half of the 1970s came in large part from Alaska. Production from Prudhoe Bay came on line in significant volumes causing Alaskan production to increase from 464,000 barrels per day (b/d) in 1978 to 1.6 million in 1980 and peaked at 2 million b/d in 1988.

Petroleum production in the lower 48 states dropped from 9.0 million b/d in 1973 to 7.5 million b/d in 1978. Only the development of oil in Alaska prevented an even higher dependency. By 1980 the production decline halted and there were very modest gains that extended through 1985. The US domestic oil industry experienced a greater rate of price increase than the rest of the world as domestic prices were deregulated.

The collapse of oil prices in 1986 wiped out many of the stripper wells, especially in Texas, Oklahoma, Louisiana, and Colorado. The US lost 1 million b/d in production between 1986 and 1989. The aftermath of the Kuwait invasion raised oil prices and halted the declining trend temporarily until 1992. The US oil production suffered another major setback in 1998 and early 1999 when world oil prices approached $10 b/d. However, higher oil prices since 1999 led to relatively stable US petroleum production of approximately 5.7 million b/d, about 60% of the US production in 1973. Figure (1)US Oil Production (Thousands b/d) Vs. Nominal Oil PricesUS oil production has been steadily declining since 1986

Growth

The growth in manufacturing sector of Pakistan had been steadily declining 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 industrial 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 in the 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 current slowdown in manufacturing output is said to be frequent power outages due to low electricity production. The ongoing energy shortages caused by an ageing energy infrastructure, chronic under investment in expansion and maintenance and unsustainable pricing regimes slow industrial output. Apart from infrastructure and capacity constraint issues manufacturing sector would further slow down in the days to come because of fast depreciating 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 emerging markets like China and India growing day by day. Pakistan with small manufacturing market surrounded by major emerging markets like China, India, Malaysia, Indonesia, Philippines and Bangladesh, will be worst effected by rise in energy prices. Pakistan with official 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 cost will 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 giants like 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 are depleting and therefore customers are ready to purchase the oil at any price available. In USA 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 hurricane developing 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 the Gulf can effect the oil market. The future prospects are not very encouraging. Emerging and developing economies like Pakistan will suffer most. Those industries which consume more energy will suffer with maximum. It will lead to rise of inflation, shutting down industries and rising unemployment in the third world countries.

Pakistan’s economy is already under intense pressure due to the competitors like China and India giving cut throat flight, at the other end it has continuous problem on its western boarders draining its resources. Pakistan exports and all its economic activities are dependent on uninterrupted energy supplies. For its energy requirement, maximum share is still of furnace, which imported from Middle East countries. Already many 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 the alternate 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 prices what 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 more efficient and to see that each drop of energy is saved. If we make serious study on this subject then we may achieve up to 20% saving in energy, hence saving in our production cost and making our products more attractive in international market. Of course the energy conservation programs cost money. However the investment will be rewarding and will be beneficial in long terms.Pakistan’s thermal units are day by day become aging, reducing their output power. A liberal and progressive policy with less bureaucratic approach towards energy producing units will help and bring attractive investment in power sector. Water conservation projects, focusing on the paving of watercourses to prevent 40 percent of irrigation water that is lost due to seepage, have also become imperative. Coal-based power generation may be one option given the country's huge coal deposits in Southern Sindh Province. Development of renewable energy resources is not moving ahead beyond symposiums and conferences. Pakistan’s industrial sector is at stake if sustainable cheap energy resources are not developed on priority. Energy efficient plants and machines are the recipe for our survival.

Growth Performance of Components of Gross National Product

2005‐06 2006‐07 2007‐08 2008‐09 2009‐10

Pakistan Trade, Exports and Imports

Pakistan’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. The trade deficit stood at $9.7 billion in FY 2007 and rose to $15 billion in

FY 2008. Pakistan is 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 the country. Due to increasing current account

deficit, 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 to 5.8% in 2008 and public and

external debt indicators worsened.

The major export earnings come from textiles. The country has not been able to

expand its exports in other sections due to which it has to suffered shifts in world

demand. The government continues with its efforts 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 imports also 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)

Rice

Leather goods

Sports goods

Chemicals

Manufactures

Carpets and rugs

Pakistan Exports Partners

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

of 2008:

 

Pakistan Imports Commodities

The major import commodities of Pakistan are:

Petroleum

Petroleum products

Machinery

Plastics

Transportation equipment

Edible oils

Paper and paperboard

Iron and steel

Tea

Pakistan Imports Partners

The following graph depicts Pakistan’s import partners with percentage share as

of 2008:

Pakistan Economic Structure: Secondary Sector

Pakistan’s manufacturing sector provides employment to 20.3% of the country’s

labor force (est. 2005). Some major manufacturing industries include cotton

textile and apparel manufacturing, carpets, rugs, rice, chemicals, sports goods

and leather goods. Some other popular industries are construction materials,

mineral, paper products, food processing and beverages. Around 51.4% of

country’s exports include textile and apparel. The secondary sector experienced

a growth of 5.4% in 2007-08. However, electricity shortage remains the biggest

challenge in ensuring development of Pakistan’s secondary sector

Pakistan Economic Structure: Tertiary Sector

The services sector of Pakistan mainly includes industries such as finance,

insurance, transport, communications and storage that account

for 24% of the country’s GDP. Wholesale and retail trade has 30% share in the

GDP. With increase in the country’s software exports, the IT industry is emerging

as a flourishing service industry. Despite union unrest, the Pakistani government

is actively engaged in privatization of banking, telecommunications and utilities to

produce more jobs in the country.

Solution

Coal power plant a viable solution to Pakistan’s energy crisisPakistan’s economic development and prosperity depend on how successfullythe country ensures abundant supply of reliable and affordable energy. If the energyproblem is not tackled effectively, the population’s sufferings will increase

Since ancient times use of energy has served as an integral part of human life and their prosperity. As population was increasing, the demand for energy was also expanding. It was the discovery of electricity and extensive use of fossil fuel that led to the industrial

revolution and that steered advancement of science and technology, culminating in enhanced level of socio-economic prosperity, better living conditions, better health and human happiness. The role of energy still remains as a vital ingredient for rapid socio-economic development. The per capita consumption of energy indicates socio-economic prosperity of any country. It is also a criterion to distinguish between an advanced and a poor country. Any nation willing to pursue rapid socio-economic advancement must assign priority to the development of this vital factor.

Energy development, broadly meaning increased provision and use of energy services, is an essential part of enhanced economic development. Advanced industrialised societies use more energy per unit of economic output and far more energy per capita than poorer societies, especially those still in the pre industrial state. Energy use per unit of output does seem to decline over time in the more advanced stages of industrialisation, reflecting the adoption of increasingly more efficient technologies for energy production and utilisation, as well as changes in the composition of economic activity. And energy intensity in today’s developing countries probably peaks sooner and at a lower level along the development path than was the case during the industrialisation of the developed world. But even with trends toward greater energy efficiency and other dampening factors, total energy use and energy use per capita continue to grow in the advanced industrialised countries, and even more rapid growth can be expected in some developing countries as their incomes advance. The fact that expanded provision and use of energy services is strongly associated with economic development leaves open how important energy is a casual factor in economic development. Development involves a number of other steps besides those associated with energy, notably including the evolution of education and labour markets, financial institutions to support capital investment, modernisation of agriculture, and provision of infrastructure for water, sanitation, and communication. This is not just an academic question; energy development competes with other development opportunities in the distribution of scarce capital, and in the allocation of scarce opportunities for policy and institutional reform.

Energy use increases as more economic sectors develop and more channels for flows are opened. Economic diversity, as measured by the number of economic sectors using energy and the equitability of flows between them, generally increases. As diversity increases the efficiency of generating output with a given amount of energy also increases. Development capacity, the product of system energy throughput the diversity of flows, is a measure of the potential system output and is calculated for selected countries. Capacity changes overtime are shown to relate to changes in economic output in selected countries. Two distinct development strategies become evident, one which promotes energy use and the other which emphasises diversity and the sustainability of each.

Sustainable human development is people-centred development. It generates economic growth and equitably distributes the fruits of that growth. It empowers people, expands their choices and opportunities, and involves them in decisions that shape their lives. For the United Nation Development Programme (UNDP), sustainable human development means focusing resources on four key areas; eradicating poverty, increasing women’s

role in development, providing people with income-earning opportunities, and protecting and regenerating the environment. Initiatives in the energy sector are an important means to achieve sustainable human development. After all, as countries develop, their energy needs evolve and expand. And, the production and consumption of energy has a tremendous impact on economies, environments and industrial development. Energy should, therefore, be taken into account in any development strategy.

Due to acute shortage of electricity and other forms of energy, and their rising prices, Pakistan has been experiencing a slowdown in its economic activities. Major negative impact is being experienced by its industrial sector and international trade. Energy availability in Pakistan in all its form has declined or at least remained stagnant during 2008-09, and due to the ever increasing demand, the energy situation may deteriorate in the current fiscal year. Like previous years, the major sectors affected will be the manufacturing sector and exports. It should be noted that Pakistan’s exports during July-December 2009 declined by 3.2 per cent, while India’s grew by 9.3 per cent in December 2009. Poor power supply, along with the circular debt burden has been singled out as one of the prime reasons for dismal performance of the manufacturing and agriculture sectors. The future economic development and human prosperity of Pakistan squarely depends on how successfully it ensures the abundant supply of reliable and affordable energy. If Pakistan fails to tackle its energy problem effectively, then its population’s sufferings will increase.

The impact of power shortage is quite visible not only in the form of slowdown in economic growth, but in the form of severe suffering of the people. Moreover, continuous increase in petroleum, oil and lubricant (POL) products and utility charges are only adding to their suffering. Increase in energy prices is immediately reflected on higher transportation costs and price hike of essential consumer items. On the other hand, to fill up the revenue gap and to meet the conditionality of major donors, the government is sometimes compelled to increase the utility charges.

The question that the people of Pakistan generally ask is, how long will they have to wait to see the nation prosper, especially when, in our corruption-prone society the gap between the have and have not is widening day by day, and when the number of people living below the poverty line is also dangerously increasing? Economic stagnation and the rising poverty level, however, can be effectively addressed by rapidly improving the dilapidated infrastructure system, energy availability and human indicators. We have repeatedly heard optimistic news such as the country having the largest coal reserves, and that it can meet its energy demand for more than a thousand years. It has hydro potential of 40,000 MW, mostly unutilised; it has huge potential of renewable energy, including at least 20,000 MW wind power etc. The time is just right to do something about this. Because of resource constraints and other problems, we cannot do everything that we need or want to do. But, we can start with a few projects that will take less time and would be easy to accomplish. One such project is to exploit the huge coal reserves of Thar, with the cooperation of some friendly countries like China. Pakistan and China enjoy exemplary friendly ties, which have not only sustained but, in fact, have expanded becoming deeper and deeper. Pakistan, being its closest friend may ask China to

cooperate in the rapid and comprehensive development of Thar Coal for adequate power generation. Coal supplied the vast majority (70 per cent) of China’s total energy consumption requirement. Over the time, China has gained the required experience and expertise for hazard-free production of coal electricity, and Pakistan can benefit from its expertise and help. It may be noted that China was interested in various energy sector development projects in Pakistan including the following:

(1) Collaboration in exploiting the Thar coal and its use for power generation.

(2) Proposal for setting up an oil refinery in Gwadar, along with oil storage and patro-chemical complex.

(3) Proposal for setting up an oil pipeline from Gwadar to Kashgar.

(4) Examining the feasibility of installing additional nuclear power plants in Pakistan etc.

It is estimated that coal consumption of the entire world will increase by 49 per cent from 2006 to 2030, and coal’s share in world energy consumption will increase from 27 per cent in 2006 to 28 per cent in 2030. Of the coal produced worldwide in 2006, 62 per cent was shipped to electricity producers, 34 per cent to industrial consumers, and most of the remaining 4 per cent to coal consumers in the residential and commercial sectors. In the electric power sector its share may decline slightly, from 42 per cent in 2006 to 40 per cent in 2020, and then increase to 42 per cent in 2030. Pakistan, being an energy deficient country can no longer neglect this precious gift of God in the form of Thar coal

Resolving energy crisis in Pakistan Pakistan is facing a major energy crisis due to huge difference between demand and supply of electricity. The country is facing a serious shortfall of 4500MW to 5500MW per day at peak hours. This shortage has paralyzed our industry, commerce and everyday life. Basically the issue is because of corrupt and unstable governments, mafia groups, mismanagement in public sector, irresponsible bureaucracy, lack of political will and negative power politics in Pakistan. It also shows failure of policies and practices of our successive governments. It seems there is no proper planning to overpower the giant of energy crisis. Proper attention has not been given to the soaring demand for energy that may be 44% over the next decade.

No special efforts have been made to generate required energy sources. It’s high time Pakistan explored all possible energy resources for its growing energy demand. The uninterrupted supply of energy can change the destiny of the nation. The consumption of energy in domestic, industrial, trade, agriculture and commercial sector is increasing day by day. The rising demand of the energy and increasing sale of electric and electronic appliance may lead a part of the country into darkness. Pakistan can produce approximately 15,000MW to 19, 800MW electricity per day in the current session. The long and short term plans for the production of the energy should be based on several

resources such as natural gas, thermal energy, hydropower, coal, solar energy, nuclear power plants, waste, wind, and other useful energy sources. These plans and projects should be opted by Federal as well as Provincial governments. Pakistan should not put all her eggs in one basket.

Iran has a gas project to resolve Pakistan’s power crisis. It produces 50,000MW electricity per day. It can supply at least 1100MW of electricity to Pakistan to overcome its recent power shortage. It can particularly supply electricity in areas adjoining Iran. Iran has a very developed electricity generation system and has offered Pakistan to meet the entire Pakistani shortage of electricity by offering the subsidized rate of 11 cents per kilowatt hour. Iran has even offered to build the entire transmission lines to Pakistan entirely with its own money and skilled labour on a record time of 14 months. It is a very brilliant option both economically as well as security wise. Iran’s offer is practically reasonable and genuine. It has the ability to fulfil Pakistan’s energy needs. It is already supplying energy to Turkey, Armenia and Afghanistan. Economically Pakistan will get as much power as it needs at low cast, and can spend its additional money on developing industries and other needed projects. And since Pakistan is going to deal with a government that is trustworthy, it will no more be under pressure of IPPs. The government of Pakistan and Iran should work together on a plan to make use of the resources of each other. There are many fields of mutual interest including oil and gas industry. These kinds of arrangements can be immensely successful and promote peace and prosperity between the traditionally linked countries.

It is estimated that 44.2 % of total electricity is consumed by household sector, 31.1 percent by industrial sector and 14.3 by agriculture sector, and the rest by other sectors. Energy plays key role in the economic development of a country. Unfortunately only 65 % people in Pakistan have access to electricity. Even then country is facing shortage of power particularly at peak hours. In fact, Pakistani governments never gave top priority to energy sector. Even Mangla and Tarbela were the incidental product of the Indus Water Treaty with India. Natural gas, one of the most important sources of energy, is used for industry, agriculture and domestic purposes in Pakistan. Pakistan’s gas reserves, 32.8 TCF approximately, are sufficient for a quarter of century only. Iran can lay pipeline from Pars to Pakistani border while Pakistan can construct the pipeline within the country. Another gas pipeline may be laid from Turkmenistan to Pakistan via Afghanistan. It also holds good prospects for other South Asian users, depending on the size of supplies that Turkmenistan can arrange. Pakistan can also import 4,000MW of cheap electricity from Central Asian States such as Tajikistan and Kyrgyz Republic. The gas can also be imported from Qatar and some other Arab countries by building a third gas pipeline from Qatar to Pakistan. With the development of Gawadar Port, Pakistan can provide the trade and energy facilities to regional companies. China, with alternative energy supply route of Gawadar, can help Pakistan in the field of energy resources. Karakoram Highway, one of the great wonders of the world, can be used for establishing pipelines and railway linkage between Pakistan and China. Pakistan has already good working relations with China for its oil and gas industry

Type of Energy

1. Thermal Energy 2. Hydel Energy 3. Wind Energy

THERMAL ENERGY

Thermal Energy is the oldest type of energy. With all known history available, Wood was always used for heating and cooking. In 2nd world war fossil fuels entered in the form of coal to get the energy, until liquid fuels were discovered and because of their convenience of transportation they took over as major contributors of the energy source.

Once the steam engines were invented then the coal or liquid fuel was burnt in the boilers and the heat produces steam which is used to drive electrical generators, or any other mechanical device.

Rudolph diesels invention of diesel engine revolutionaries the energy concept and today we see sine the majority of machines moving on diesel engines.

Diesel engines can be 2 stroke or 4 stroke type. They can be in line or arranged in V or even W shape. They can be single acting or double acting.

Another method of converting thermal energy to mechanical energy is by the gas turbines. Turbines are also used to run by steam or hot gases which are produced by igniting fuel. Energy Crisis in Pakistan 11

For converting thermal energy to electrical energy alternators are used to drive on constant RPM.

The choice of gensets strictly depends on the requirement of the client, before ordering a power plant following points to be considered

1. Expected demand of the power. 2. Type of fuel required 3. Space available for the power plant 4. Avilability of genset 5. Avilability of local service back up and stock of parts 6. Price is paramount importance and hidden expenses should be looked

carefully The major manufacturers and suppliers of Gensets based on internal

combustion engines are given below 1. MAN 2. Wartsila 3. Caterpillar 4. Jen Bacher 5. Waukesha 6. Mitsubishi 7. Detroit Diesel 8. Rolls Royce

Internal combustion engine can obtain 30-50% thermal efficiency. It means that around 50% energy is wasted in the form of exhaust gases , cooling systems and radiation. Therefore for larger plants heat recovery systems are utilized.

In Pakistan due to attractive gas prices this is a general trend that gas operated power plants are preferred if gas connections are available.

The gas gensets are available from less than 1 MW sizes to 6 MW configuration. Normally they are V type and 12,16 18 and 20 cylinder configuration.

In addition some models are available on duel fuel technology which can be operated simultaneously on gas and furnace oil.

The price of a 3 MW gas genset can be expected around 1 Million $. However low RPM engines will be more costly Unit cost of fuel on gas genset can be evaluated as follows

Fuel Cost Rs 2.7 (depends upon the genset ) Maintenance Rs 0.20 Lubricating Oil Rs.0.10 Chemical R Rs. 0.02 General stores Rs. 0.01 Labor Rs.0.10 Overhead +Insurance Rs.0.07 Financing 0.20 IPRI Factfile 12

Total Rs. 3.40 The engines which are running the fuel cost is only variable and can be calculated by multiplying fuel cost by a factor of 225. (225 grams / KWHR is an average net fuel consumption expected.)

HYDEL ENERGY

Water flowing in the rivers has kinetic energy. Once they are used to drive 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 method are normally used:- 1. Dams 2. Run of River projects. In case of Dams the water flow is restricted by making a huge storage

device and the head of water is increased, the water then is allowed to flow by means of gates and pass through 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 dry seasons.

In run of river projects the water is diverted through the tunnels and once it gains the head allowed to fall and pass through the turbines and back to river. the water in these projects is continuously flowing and not being stored.

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 is located further detailed feasibility study is required before proceeding any serious effort to start the work.

The feasibility study should include following field work. 1. Detailed Mapping of the area 2. Topographic study of the area 3. Seismic refraction study 4. River flow data 5. Weather data containing, Temperatures, pressures, rain humidity 6. Water sampling and testing 7. Environmental study 8. Social impact

Energy Crisis in Pakistan 13

9. Wild life and fish study 10. Identification of stake holders of the area 11. Coring and getting samples of the soil at 50-200 meters depth 12. Laboratory testing of the cores samples 13. Tectonic study to evaluate earth quake dangers

2007 http://www.energy.com.pk/hydel.htm

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 and will shatter its dream to become one day a 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 overcome this shortage Government take a initiative to investigate Alternate energy resources in Pakistan developed Alternate Energy Board AEDB. The Board is headed by Retd Air Marshal Shahid Hamid. identified 50,000 MW energy potential from wind resource

Pakistan is blessed with a large resource of wind corridor. Although Pakistan meteorological Department was gathering wind data for quite long time But recently United States provided wind energy map for Pakistan which confirms a strong wind corridor in Sind coastal area.

AEDB issued about 80 LOI to the investors List of LOI holders )to develop 50 MW wind farms. Out of which 15 are already issued the land 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 sponsor 2. Review of proposal by AEDB 3. Posting of Bank Guarantee 4. issuance of letter of intent ( LOI ) 5. Feasibility study 6. Generation License 7. Tariff Determination 8. Submission of Performance Guarantee 9. Tariff determination by NEPRA 10. Submission of performance guarantee 11. Issuance of Letter of support

IPRI Factfile 14

The first requirement of conducting feasibility study is to install a wind mast. The three major manufacturers of wind data are listed below. This document explains the method for installing weather station.

1. www.wilmers.com 2. www.ammonit.de 3. www.environdata.com.au

Geological, seismic, tectonic and environmental studies will be required along with Digital mapping and topography of the site for preparing a bankable feasibility study. A confirm EPC cost will also be needed for calculation of tariffs.

Some large manufacturers of wind turbines are given below 1. Denmark (27.9%) 2. GE Wind, US (17.7%) 3. Enercon,Germany (13.2%) 4. Gamesa, Spain (12.9%) 5. Suzlon, India (6.1%) 6. Siemens, Denmark (5.5%) 7. Repower, Germany (3.1%) 8. Nordex, Germany (2.6%) 9. Ecotecnia, Spain (2.1%) 1 Mitsubishi, Japan (2.0%)

WIND ENERGY BASICSPower developed by a wind turbine can be mathematically shown in following formulae The lay out and designing of the wind form can be done by wind energy planning and project software available in market in a reasonable price . One such software is Wind Pro which is a very convenient tool for project management. Environmental Protection agency requires a detailed environmental impact study of the project. The following issues should be discussed detail

1. Birds collision or alteration of their migration routes 2. Noise impact 3. Flickering