Budget comment: Energy crisis needs to be tackled head-on

Pakistan’s growth potential is being wasted because of power shortage.

Zubair Motiwala June 06, 2011

The Federal Budget 2011-12 is appreciable under the current circumstances and the government could not have done more. However, the budget missed out on focusing to improve measures to increase the growth rate.

Pakistan’s population is growing at a rapid pace and we do not have enough opportunities to meet the needs of the country. We also do not have enough opportunities for the youth and neither is our employment rate increasing in accordance with the population growth.

We need to speed up measures to deal with the rising population and also create job employments. This can only be done if we bring in both local and foreign investment into the country. This will not be possible unless we improve our infrastructure and deal with our energy crises head on.

The public sector development programme should ideally have been segregated into two parts - one part dealing with the federal and provincial government and the second part specifically focusing on energy and infrastructure.

Pakistan has huge foreign investment opportunities but we are not being able to attract them because of our energy crises. We are struggling to maintain our existing contacts, let alone bring in new foreign investors as we cannot assure them well-maintained infrastructure.

The government should focus on ensuring that all industries, power plants and other units that consume furnace oil or gas are converted to coal-based consumers. The government should follow a strict energy conservation program. This will make a huge difference in our national exchequer as we will reduce on our oil import bill.

There should be legislation that all domestic geysers should be converted into solar powered units. Legislation should also be made to convert street lights into solar powered units. Karachi alone can save 85mmcf of gas if these measures are carried out.

The government should also focus on wind power generation as this is the quickest way to shed massive imported fuel bills. Thar coal needs to be improved. Effluent plants need to be introduced in all major industrial sectors and followed on rigid terms. We need these measures for the future.

The budget, however, also had a few positive points. The decision to eliminate regulatory duties and excise duties from a number of sectors is a positive step. This will help increase industralisation. Furthermore, maintaining the zero rated sectors will also encourage exports and help to keep Pakistan competitive in the global market.

The total budget is worth Rs2.767 trillion. Of this Rs700 billion plus will go to the army, Rs900 billion plus will go into debt treatment, Rs300 billion to deal with state owned entities which are in losses, Rs740 billion has been allocated for the PSDP which I think is a very large figure.

At present, in my opinion, the focus remains on how the government will generate the Rs1,952 billion tax collection target they have set. In the budget for 2011-12, the government has reduced the duties from several sectors; it has increased the non-income tax salary limit etcetera. Then where are they going to generate the revenues from?

The government needs to reduce on its expenditures and take some rigid measures to curb the Rs850 billion budget deficit. For example, if the agriculture sector was taxed as we had demanded, then Rs440 billion could have been easily generated from there as it contributes 22 per cent of the GDP. Moreover, if the Rs300 billion plus which the government spends to keep afloat state owned entities running in losses, were managed through measures such as privatization of these entities- then Rs440 billion from the agriculture sector tax and Rs300 billion saved from selling of white elephant assets would have been enough to curb most of the deficit.

The point remains that we need to take some tough decisions. I have trust in our finance minister Abdul Hafeez Shaikh as he is a seasoned manager, but the fact remains that without tough decisions and immediate addressing of the energy crises, we will not be able to come out of present circumstance. The post-budget sessions and the government for the new fiscal year need to focus in the right direction now.

The writer is adviser to the chief minister of Sindh

Published in The Express Tribune, June 6th, 2011.


Zain Khan | 11 years ago | Reply I enjoyed reading article. This means everybody know what is the problem, but due to 70% of our parliament comes from Agriculture tax, they are getting away with it from last 63 years. Another thing, I would like to add that there is massive corruption in CBR, if we plug that corruption, we can add more to our revenue. Most critics believe that it is around 500-800 Bn Rupees. Also, we need to have very tranparent system for using PSDP for federal and provincial budget as this is the only area which contributes towards increasing GDP and also creates more job opportunity. Auther also missed out the austerity measures in federal and provincial government budgets so we can reduce the non-development expenditures. Towards trade balance, we need to have such policies in place where we can export more and import less commodities where we are spending more like petroleum, palm oil etc.
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