Pressing energy requirement in Pakistan - A key visit to China.

Byline: Syed Fazl-E-Haider

Last week, Prime Minister Imran Khan paid an important visit to China at a time when Pakistan is facing multi-facet challenges on economic front. Pakistan's energy challenge still poses risks to the country's economic growth and expansion. The country still faces power shortages due to rapid growth in demand for electricity. The country is largely dependent on oil imports. Owing to unstable prices and supply of oil and gas across the globe, the visiting Prime Minister needs to discuss and seek Chinese cooperation and expertise to develop the country's renewable energy resources in a big way.

Time has come to shift towards country's renewable energy resources such as water, wind and sunlight and reduce the dependency on conventional thermal based generation facility. Pakistan meets around 50 percent of its energy need with the indigenous gas production and 29 percent with domestic and imported oil and 11 percent with hydro-electricity. The country's annual energy requirements are expected to more than double to 177 million tons of oil equivalent by the year 2020.The country has an installed refining capacity of 12.82 million tons a year from its five refineries. Pakistan's consumption of petroleum products currently stands at about 21 million tons, of which about 85 percent was met through imports. The country meets only 15 percent of the consumption from indigenous crude production, while 30 percent crude and 55 percent refined products are imported.

With a refining capacity of 13 million tons, Pakistan meets only half of its annual requirements. The country's demand for petrol is likely to increase in the coming years. The demand for petrol will cross 8m tons by 2019-20 from the current 4.73m tons, according to one estimate.

If the new PTI government raises prices of petroleum products in a move to pass on the full impact of international oil prices to domestic consumers, it is bound to spark inflation and affect industry in the country. The inflation goes up due to increase in petroleum products prices, electricity and gas prices. The government will not be able to afford subsidizing petroleum products for longer. It has no choice but to continue taxing petroleum, as it faces rising fiscal deficit, which will have to be made up for by printing money through the State Bank, itself the single biggest cause of soaring inflation in the country. Hike in fuel prices drives up inflation in the country by increasing...