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PAKISTANS ENERGY
CRISIS ON
MANUFACTURING
INDUSTRY
SYED UMER NOMAN__________7457
SYEDA SAMIA ASIM __________8860
TOPIC: 07
INTRODUCTION
Energy is the utilization of resources (physical and chemical) to produce
power to provide light and heat. Energy plays a vital role for the countrys
economic growth. There are various sources of energy, the major source of
energy in Pakistan are sun, wind, tides and water, natural gas, coal, fossil
fuel, petroleum and oil.
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COAL; 0.1
OIL; 36.3
SOURCE,
HYDROELECTRIC; 29.1
NUCLEAR; 5
GAS; 29.5
Figure 1
These energy sources generate power that produce electricity and gas for
the use in sectors such as industrial, commercial, transportation, residential,
agriculture and government. Energy is directly related to the living standards
of citizens and industrial growth. Energy as electricity and gas are used in
every sector for both living and work. It also has a major impact on industries
for the production of goods and services thus being a significant part of
manufacturing industry. Industrial growth is an important aspect of economic
growth and provides a large contribution for a countrys growth or expansion.
For any countrys industrial growth there is a direct relationship between
energy and production.
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Figure 2
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CEMENT; 0%
COMMERCIAL ; 5%
INDUSTRY; 31%
Figure3
0%,
fertilizer
21%,
transport
power
11%.
Industrial
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ENGINEERING
GOODS
INDUSTRY
AUTOMOBIL
E INDUSTRY
STEEL
INDUSTR
Y
MANUFA
CTURING
INDUSTR
Y
TEXTILE
INDUSTR
Y
FERTILIZER
INDUSTRY
CEMENT
INDUST
RY
LEATHER
INDUSTRY
Figure 4
TEXTILE INDUSTRY
Textile industry is the biggest industry in Pakistan; it is the largest export
industry. Due to lack of resource the growth of the textile industry is slow.
This industry is trying to move from old machineries and handmade concepts
to new technologies currently present in the market, but unfortunately
technology needs electricity energy for their working, yet we are standing at
the same position. This causes slow as well as low in quality of production. It
contributes up to 8.5% from its exports. Other impacts like increase in cost of
production, increased taxes are declining the rate of export. The major
industries that are placed in Faisalabad are suffering from energy crisis and
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The potential
AUTOMOBILE INDUSTRY
Pakistans auto industry is one industry that is currently in development
phase but has a huge growth potential in terms of demand of all type of
vehicles in the country. It is the second largest tax payer sector besides oil
and petroleum sector.
assembly units are not able to utilize the technology and to use the
production capacity as its best because of the energy crises. Many of the
four wheeler assemblers have stopped assembling activities as a result of
energy crises. Furthermore, the hybrid car industry has also failed in Pakistan
because of the energy crises.
CEMENT INDUSTRY
Cement industry also have an important part to play in economy. Where
infrastructure is based on steel and aluminum it is also based on cement.
The plants that existed at the time of independence were 4 in numbers, and
then total 29 industries developed (small and large) that contributes to the
economy cycle. This industry widely provides job opportunities to more than
100,000, hence reducing unemployment. The industry based on mechanical
and chemical processes, thus it requires gas and electricity for quality
production of cement. Energy crisis have also hit this industry as gas
shortage leads to switching off of burners, reactors and machines that
ultimately pack those cements to be moved in the market. The count is
reduced to 25 or less from 29, and it will exceed if the situation still remains
the same. The cost and exports ultimately is affected, and import of the
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SUGAR INDUSTRY
Pakistan being an agricultural country comprises of a sugar industry which is
the largest agro based industry other than textiles. There are 81 sugar mills
which come under the sugar industry.
industry is facing the high cost of production along with the electricity
shutdown which puts the burden on the mill owners who transfer this burden
on the general public by increasing the sugar prices.
LEATHER INDUSTRY
The leather industry of Pakistan is the second largest export industry and
one of the major foreign exchange earning industry of Pakistan. The energy
crisis has badly damaged this sector and has made it uncompetitive in the
industrial market. Due to the unavailability of gas and extended load
shedding hours many tanning units are closed and thus the exports are
declined by more than 14% during last five years. The leather industry of
Pakistan is able to produce world class leather but due to frequent shut
downs the quality is also affected as it needs a continuous processing and
because of the electricity frequent shutdown the process gets interrupted
which in the end results in bad quality product and bad image for the
country.
ALUMINUM INDUSTRY
Aluminum industry of Pakistan is not a big industry in terms of size as
compare to textile and leather industry. With the increase in load shedding
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STEEL INDUSTRY
Pakistan steel industry is one of the major industries of Pakistan. Currently
there are more than 50 companies working in the steel sector. For the last
ten years Pakistan steel industry is facing massive decline because of the
output not producing according to the maximum capacity despite having
high local demand. The reason behind it is the small scale production which
increases the steel cost. With the energy crises the situation is getting even
more severe as with the gas shortage the production has been affected and
with increased electricity, fuel and material prices the production cost is
increased resulting in damaging the industry.
FERTILIZER INDUSTRY
Pakistans fertilizer industry consists of 10 fertilizer units, out of them six are
public and four are in private sector. Along with the other industries fertilizer
industry has also been affected because of the energy crises. Many of the
industrial units are closed down because of the energy crises and those
which are currently working are not able to produce to their maximum
capacity which is 4,298,000 N tons of fertilizer are manufacturing 2,624,000
N. tons because of the frequent power break down resulting in damaging the
industry.
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under
the
engineering
goods
manufacturing
industry.
As
COST OF PRODUCTION
In Pakistan manufacturing industries utilizes at least 33% of production cost
in terms of energy prices. With the energy crises going on the supply of
energy have declined thus increasing the cost of energy which ultimately
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TECHNOLOGY IMPLICATIONS
Technology play an important role in the industrial growth as by using the
advanced technology and having latest machinery we can achieve efficiency
in production, reduce the cost of production, can reduce the production time
and can achieve the economies of scale but to acquire the technology and to
use it in industrial production one must have electrical energy only then the
technology can be utilized. In Pakistan the technology implications is
impossible due to energy crises and because of those industrial machineries
are getting idle. Even if manufacturing industries go for the latest technology
they cant apply it because of electricity crises.
QUALITY
With the industrial production of the country badly affected by the energy
crises, the quality has been compromised in a way that due to electricity
shortage our manufacturing industries are unable to the efficient production
so for that to meet the demand the local industries are going for the bulk
production anyhow with the maximum usage of electricity and are not
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OUTSOURCING
Manufacturing industries have started outsourcing their part of the
businesses due to various reasons; one of them is the energy crisis. It is very
difficult for a manufacturing industry to maintain its every department in
such a country where there are energy crisis and shortage of resources that
it had become a headache for the industries to manage its manufacturing
area. Industries are outsourcing its functions due to many reasons that are
uncountable but specifically if we talk about the manufacturing side
industries outsource due to the increase in the material costs of the raw
material as well as the finished goods that ultimately increase the prices of
the products or its unit cost and services as well. Industries will suffer badly
either outsourcing its functions or managing it by themselves.
EXPLOITATION OF LABOR
When the technology was applied in the industries to make the production
efficient, cost effective and to achieve economies of scale, large number of
labors were cut off from their job as machines were doing all the work but
now because of electricity crises the machineries are becoming useless and
with the increased cost of electricity the industries in order to minimize their
cost and losses are going for the manual work, but as human take more time
than machinery for production so the employers are pressurizing the labors
and even using child labor to meet the demand of production.
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DECLINE INVESTMENT
Energy crises have also affected the flow of investment for the industrial
sector. The investors are not interested to invest in Pakistan as those who
were doing business here and were running their factories are shutting it
down because they are unable to produce thus bearing losses, so the
investment rate is declined for the manufacturing industry.
further
production.
Shutdowns
had
already
made
Pakistans
manufacturing industry sector small, and now new markets have also come
up with the energy demand making energy prices so high that it becomes
completely impossible for the Pakistans industries to buy energy externally
for production reasons. Rise in energy prices causes higher production costs
and manufacturers are forced to lower the labor costs.
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SHUTDOWN
During last five years the shutdown count has reached up to 1579
manufacturing industries due to energy crisis and high cost of running
businesses, and this count is likely to increase in upcoming years. Electricity
shortage and gas shortfall leads industries to shutdown their departments,
as continuous loss in their business and high prices are unaffordable
currently. The numbers of industries that are closed in the provinces are
Punjab 160 units, sindh 800, Khyber pakhtunkhwa 700, and Baluchistan 40.
The gas shutdown hits the industries like steel, cement, medicine and many
other that basically are dependent on the gas for its manufacturing products.
Shutdown of manufacturing industries causes another problem that is the
second largest problem of Pakistan is unemployment.
UNEMPLOYEMENT
Manufacturing industries are the second largest sector that contributes in the
economy and hence provides employment to all class ranked people.
Unemployment in the industries is caused due to large number of
shutdowns. The industrial sector at the current era is working backwardly,
because of which less employees are hired to work. Due to gas and
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CONCLUSION
The industrial sector plays an important part in the economic growth of a
country. With the energy crises in Pakistan every sector has been affected
particularly the adverse effects can be seen on the industrial sector. Almost
every industry has become a victim of energy crisis and because of this;
shutdowns and unemployment have become the major threat with which the
economy has to deal. The problem is getting severe day by day, and if the
situation remains the same the country would completely be dependent on
other countries for production and supply of goods and basic necessities of
life. So in order to handle this curb Pakistan has to focus on its energy
utilizations plan to face the current situation, before its too late to handle.
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If these issues are not seriously taken in concern by government, it will end
up crunching the economy.
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