Stagnant growth: Energy shortage stunts growth in large scale manufacturing

Large scale manufacturing fails to record significant progress.

ISLAMABAD:

The circular debt and energy crisis keep pulling back growth in the large scale manufacturing sector that grew 1.7 per cent from July through April – a stagnant number for the second consecutive month.

The provisional industrial production data shows that the growth in the large scale manufacturing sector remained at 1.71 per cent during first ten months (July-April) of the outgoing fiscal year. During July-to-March the LSM also grew by 1.71 per cent. The share of  large scale manufacturing (LSM) in the total size of the national economy is 12.1 per cent, according to the Economic Survey of Pakistan.

The provisional data is computed on the basis of output of 100 items monitored by Oil Companies Advisory Committee, Ministry of Industries and Provisional Bureau of Statistics. Out of 100 items 42 registered growth and 58 saw decline in production, show the data released here by Federal Bureau of Statistics.

“The performance of the LSM is affected by the factors like weakening of demand in the international and domestic market, inflation, high input costs, higher government borrowing crowding out availability of credit to private sector and acute energy shortage”, states the Economic Survey of Pakistan.

The financial problems in the oil and gas sector have started affecting every spectrum of life. The petroleum sector’s inter corporate debt has once again crossed Rs 338 billion. Pakistan State Oil’s receivables have touched Rs 135 billion again; the Oil and Gas Development Company’s receivables have reached Rs 102 billion and the PARCO’s Rs 65 billion. Due to the same reason half of the country is facing petrol shortage, compelling commuters to make long queues for hours under the scotching sun.

The official data shows the oil and gas sectors are constantly in the negative zone. In ten months production in these sectors dropped 3.1 per cent, a major factor behind less than the targeted annual growth. Jet fuel oil production contracted 3.1 per cent, kerosene oil 10.7 per cent, motor spirit 26.6 per cent, high speed diesel production dropped almost five per cent but diesel oil saw nominal growth of 0.3 per cent. The petroleum products’ production dipped over one fifth and the LPG production dropped one-tenth during first ten months over the corresponding period.

The data provided by the Ministry of Industries depicts 3.4 per cent growth- the puller in 1.71 per cent overall growth. The major push came from the sugar industry that grew almost one-third over the last year. By close of the crushing season the country produced 4.1 million metric tons sugar that is sufficient to meet the domestic consumption needs. Pakistan’s average monthly sugar consumption is estimated at 350,000 metric tons. Last year the sugar production had remained at 3.1 million metric tons, resulting into imports for meeting the growing domestic needs.

Cigarette production fell 3.2 per cent and cement production dropped over eight per cent, Tractors, trucks and buses production also contracted. On the other hand, jeeps and cars production increased almost 15 per cent and motor cycles production soared almost one-fifth. The cotton yarn grew over three per cent.

Monthly Data

According to the statistics, the LSM growth remained almost stagnant and grew 0.9 per cent in April over the same month of the last year. On monthly basis, the oil and gas sector showed recovery signs while the industries under the domain of the provinces registered negative growth.







Published in The Express Tribune, June 19th, 2011.