4/24/2021

NAME: AMMARAH CHAUDARY

ROLL NO: 05
SEAT NO: B18107006
BBA SEMESTER 5

ASSIGHNMENT TOPIC:-
IMPACT OF PAKISRAN’S ENERGY CRISIS ON
MANUFACTURING INDUSTRY

ASSIGNED BY: MA’AM WARDAH IRFAN

Introduction:-

The main objective of the study is to find out the extent of energy crisis impact on
manufacturing industry of Pakistan. 2007 is considered the starting point of the
ongoing crisis. Pakistan’s energy sector has become a major drain on the economy
and growth. Energy crisis is defined as the price rise of the energy resources or a
great shortfall in the supply of the resources of energy. Usually it refers to shortage
of electricity, oil, natural gas, and other natural resources. As the world is changed
entirely by globalization, many issues have emerged among which the energy got
significant attention from researchers. With respect to supply the demand for
energy is continuously increasing in this globalized world; resultantly a crisis for
energy has emerged. Shortage of energy is faced by most of the countries and
consequently it is severely affecting their economic growth and social
transformation. Energy is considered as a backbone of any economy and plays an
important role in the socio-economic development of a country. If there is not
sufficient energy, industrialization will not take place, it is crucial for running
industries and output units. As expansion in energy is expected to result in higher
growth similarly its shortage may hold back the growth process. Energy is vital for
running all the resources and energy crises directly influence all the sectors of the
economy such as the agriculture sector, industrial sector, unemployment, poverty,
lower GDP and higher inflation. Unfortunately, Pakistan is facing the worst energy
crisis in its history. Pakistan energy’s infrastructure is not well developed and said
to be managed poorly. Despite population growth, economic growth and increased
demand during the past decades, no serious efforts were made for the generation of
energy. Moreover electricity theft and transmission losses due to outdated
infrastructure have worsened the situation. Hydro, oil, and natural gas are the three
primary energy resources of Pakistan used to fulfill the energy needs of the
economy. The production, economic, industrial and trade activities of Pakistan are
badly affected due to the energy crisis.
Body:-

The main objective of the study is to find out the extent of energy crisis impact on
manufacturing industry of Pakistan. 2007 is considered the starting point of the
ongoing energy crisis. Pakistan’s energy sector has become a major drain on the
economy and growth.

Industrial sector is the second largest sector of Pakistan’s economy in terms of

growth. And manufacturing sector is considered the backbone of development.
Manufacturing is the production of goods in large quantities after processing of
raw materials to more vulnerable products. The development of manufacturing
industry is considered as a key indicator for overall economic growth. Even the
development of tertiary, that is service, is also dependent on the development of
manufacturing activities. Regarding employment opportunities it provides one of
the most important source to the labor force. At least, quarter of the total labor
force in the world are directly engaged in industrial sectors. The mounting price
level of energy resources forced the manufacturing industries to use new raw
materials. Energy as electricity and gas are use in every sector and 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
aspects of economic growth and provides a large contribution for a country’s
growth or expansion. For any country’s industrial growth there is a direct
relationship between energy and production. Energy plays a vital role in the growth
of any economy.

The importance of energy is widely recognized in every sector of the economy.

Energy crisis often has effects on the rest of the economy, with many recessions
being caused by the energy crisis in some form. In particular, the production costs
of electricity rise, which raise manufacturing costs. Growing energy demand is the
big cause of energy shortfall, over the years, there is greater need of energy
because of Increase in population, Industrial and Agriculture growth. In Pakistan,
due to lack of planning, less number of power producing plant were installed to
meet the demand. Over the year the gap between energy demand and supply
increases.
IMPACT OF ENERGY CRISIS ON MANUFACTURING INDUSTRY.

 Energy is the backbone for industrial growth of any country. Out of the total
consumption of gas and electricity Pakistan’s industrial sector utilizes 31%
of the gas and 27% of the electricity for its production usage, but due to
energy crisis this industrial sector facing adverse effects. Gas reduction and
electricity shortage has badly affected the performance of the industries.
 In Pakistan manufacturing industry utilizes at least 33% of production cost
in terms of energy prices. With the energy crisis going on the supply of
energy have declined thus increasing the cost of energy which ultimately
affects the industries production cost. Industries are striving hard to come up
with the increased cost of production and decreased profit. If the industries
go for another source of energy that will too increase their costs as
installation of any new source is expensive. Eventually this burden of
increases prices is faced by the manufacturing industries thus their cost of
production increases which results in decrease rate of output.
 Due to energy crisis we have gas and electricity shortage making it difficult
for the industries to meet the optimum quantity of their production. Because
of the electricity the industries are unable to run their machineries and the
production process is affected. The manufacturing industries are going for
the manual work for the production as the order they received for the supply
of goods they are unable to supply them on time as their production speed
has slowed which results in increased in lead time.
 With the industrial production of the country badly affected by the energy
crisis, the quality has been compromised in a way that due to electricity
shortage our manufacturing industries are unable to the efficient production.
 Technology play an important role in the industrial growth. In Pakistan the
technology implications is impossible due to energy crisis and because of
those industrial machineries and getting idle. Even if manufacturing
industries go for the latest technology they can’t apply it because of energy
crisis.
  In manufacturing industries because of electricity crisis the machineries are
becoming useless and with the increased cost of electricity the
manufacturing 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.
 Energy crisis have also affected the flow of investment of industrial sector.
The investors are not interested to invest in Pakistan and those who were
doing business here and were running their factories are shutting it down
because they are unable to produce and bearing losses, so the investment is
declined for the manufacturing industries.
 Shutdowns had already made Pakistan’s 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
Pakistan’s manufacturing 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.
 The major impact of energy crisis on manufacturing industries that hits the
economy is exporting of the products that contribute in the economy. There
is constant decline in the graph of exporting products by the manufacturing
industries.
 Manufacturing industries are the second largest sector that contributes in the
economy. Due to shutdown of manufacturing industries causes
unemployment that is the second largest problems of Pakistan.
 Manufacturing industries have started outsourcing their part of the
businesses due to energy crisis.
 Owner of manufacturing industries who are competent enough to take their
businesses abroad and globally are completely shutting their firms from
Pakistan, and gaining foothold in international market for further production,
and then export their products to other countries. Globalization had make it
difficult to survive in the market for other remaining industries in Pakistan.

Conclusion:-
The industrial sector plays an important part in the economics growth of a country.
And has positive and significant impact on GDP. With the energy crisis in Pakistan
every sector has been affected particularly the adverse effects can be seen on
industrial sector. Energy crisis is the result of increasing populations, lake of
resources, high demand of power and no planning in past. The major cause of short
fall in theft of energy in Pakistan. On the other hand raising the fuel prices is the
big cause of generating electricity. Pakistan’s energy infrastructure is not well
developed, rather it is considered to be undeveloped and poorly managed.
Shutdowns and unemployment have become the major threat with which the
economy has to deal. If the situation remains same the country would completely
be dependent on other countries for production and supply of goods. So in order to
handle this situation Pakistan has to focus on its energy utilization’s plan to face
the situation. Because in Pakistan most industries are not self-capable of generating
power and also distressed with heavy taxes and costly energy supply with
continuous disruption which results in loss of output production. Government
should come up with effective power policy. There are alternate resources of
energy to produce power such as solar energy, wind energy, bio-gas technology,
bio-mass, geothermal power and proper usage of coal, government should utilize
them in the most effective way possible as the problem is not the lack of resources
but the utilization of the resources. Government of Pakistan should focus on
utilization of energy resources which in turn will smooth the way of economic
growth.

Reference:-
Research paper on energy crisis

https://hrmars.com/papers_submitted/4659/Impact_of_Electricity_Crisis_on_Industrial_G
egression_Analysis_Approach.pdf
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.887.5294&rep=rep1&type=pdf