The importance of industry in a country is an accepted reality. When this sector suffers, the whole nation suffers. No nation, can ever think of progress and development without developing the industry. This sector can develop by hard work of the industrialists and proper policies of the government.
Every one knows that Pakistan inherited a few industrial units. Sheer dedication of the nation to industrialise the country, particularly that is of industrialists, was exemplary. They started from a scratch and now Pakistan enjoys a certain level of development in this sector.
Pakistan inherited many handicaps in the field of industry. Lack of sources, infrastructure and skilled labour (these all still persist). In spite of all these difficulties and hardships the industrialists in particular and nation generally showed the determination and resolution to develop this sector. The level, at which their efforts can bring forth, that, is achieved.
The most crucial factors ie patronage of the government in this regard is at a very low ebb rather sometimes it seems it is demoralising the industrialists, harming the industry and makes the nation suffer. The policy of nationalisation, in the decade of seventies is an example of unconcerned attitude of the government.
Pakistan has enjoyed three types of governments; democratic, martial laws and a hybrid of the two mentioned aforesaid. In these all governments the process of discouraging, punishing and troubling the industrial sector is a constant and continuous feature. Even after passing golden jubilee, the government has failed to visualise the importance of the sector and any solid framework even for the survival of the sector is yet to be made. Notions of uncertainty and inconsistency of the policies are nurtured. There is it seems no end of this perspective. This is dangerous and demoralising situation for the nation and for all the well-wishers of the country.
Bad policies of the past may be neglected, although it is a tough task, if current policies are to mend the losses. But the continuation of such policies keeps on demoralising the industrialists. Power generation policies of the government are the best example in this regard to show the indifference of the government.
Nation generally and the industrialists particularly started to recover after the shocks and wounds of nationalisation when another crises struck that was of power crisis. This, very basic raw material, a lifeline for industry became scarce. Loadshedding became the order of the day. In this situation prosperity of the sector became out of question. Survival of the sector even became a remote possibility.
When Nawaz Sharif came into power he tried his best to attract foreign investment in the country to develop this most vital sector. His efforts were not fruitful because of power crisis in the country.
It was the biggest hurdle in any sort of development in this regard. Foreign investors could not motivate themselves in this bleak situation and who dared to do were portrayed by as "Qurbani Ka Bakra". The situation was not very much different for those who were already in the business. Loadshedding just not only disturbed the industry but domestic users also suffered. If Loadshedding ended for domestic users this was not due to improvement in production of power but by the closure of many units of industry.
The private sector started to import electricity generators powered by diesel oil. The industrialists started to build in-house power plants to get rid of blackmailing of WAPDA and huge wastage of sources. A lot of foreign exchange was spent on the import of these units. This cost was not sufficient when one compares the advantages and benefits.
IN BENAZIR'S PERIOD, A REVOLUTIONARY IDEA OF IPP WAS GIVEN TO THE NATION. THE POWER POLICY HAD THE SALIENT FEATURES AS FOLLOW:
-- The investors were free to propose the site and opt for technology and fuel.
-- Investors could propose projects based on hydro, or other renewable and/or non-conventional sources of energy.
-- The power was to be purchased by WAPDA/KESC under the long-term contracts covering the concession period.
-- The policy offered an upfront bulk power tariff.
-- Thermal projects were to be implemented on Build-and-Operate (BOO) model
-- Availability of draft security agreements.
-- Assurance for convertibility of rupees and availability of foreign exchange to cover the necessary expenses of the projects.
-- PSEDF could provide up to 40% of the capital costs of the project.
-- Removal/reform of Section 13 of 1947 Foreign Exchange Regulation Act.
-- Exemption from corporate income tax on income earned from sale of electricity.
-- Exemption from sales tax, Iqra, flood relief and other surcharges.
-- Exemption from customs duties on the import of plant and equipment. Exemption from income tax in Pakistan for foreign lenders to such companies.
At that point it seemed a great blessing. It was the time when the industrialists thought now it would be a smooth flow for the sector. It was anticipated that at least the importance of the sector is visualised by the government. Work started with zeal and zest. The private sector was encouraged to invest in power sector. The industrialists, who were blackmailed by the monopoly of WAPDA and continuously tormented by the inefficiency of the, were quite pleased.
An example of this blackmailing is, whenever a transformer of an industry stops work, it is believed it all happened because of negligence or improper use by the organisation, industry men; nothing is supposed otherwise. Moreover unscheduled Loadshedding, frequent power failures and supply of excessive or voltages were a routine matter. This results in huge loss of time, raw material and sensitive and costly equipments. In addition to this, usually there was no redress for these grievances.
Shifting from diesel engines to furnace engines was not an easy task for the industrial sector; it was done because no other option was available. Thus all foreign exchange spent on the purchase of diesel engine generators, was wasted. This action just not only shocked the industrialists but also drained blood from the very weak economical body of the nation.
The industry once again found itself in doldrums. Profound and multiplied magnitude of problems was once again there to be faced by the industry. This shifting was continued for the sake of survival.
Furnace oil powered engines were imported to run the business of power generation. IPPs continued to produce electricity in spite of all difficulties. Another change of stance was quite anticipated by the IPPs.
IN 1998 THE GOVERNMENT ONCE AGAIN ISSUED A POWER POLICY; THE VERY IMPORTANT FEATURES WERE AS FOLLOW:
90% First Year Allowance (FYA), for hydel and indigenous coal base projects the cost of plant, machinery and equipment.
No respite in customs duties, sales tax, Iqra, flood relief and other surcharges as well as
IMPORT LICENSE FEES: There was still a good point in this development that the price of furnace oil was still very low. The cost of production of electricity produced in-house was low as compared to the cost of electricity bought from WAPDA. According to the policy IPPs were exempted from tax. Development continued even in the presence of hardships and difficulties.
To intensify the hardships and difficulties the government started to raise the prices of furnace oil. In start furnace oil cost almost Rs 2.50 per litre which increased about Rs 25 per litre. This increased cost of furnace oil forced this sector to anticipate elimination of this fraction of industry and gradually all the sector.
In 2002 another power policy was issued. In this policy the government came forward to plant the idea of natural gas powered generators. The killing instinct of the government was quite obvious for the IPPs which use furnace oil in their power plants in this policy.
THIS IS DEPICTED IN THE FOLLOWING FEATURE OF THE POLICY:
To enhance share of renewable energy sources, hydel and fuels with other then oil-based fuels, with full levy of income tax on oil-fired power projects.
For a moment if one conceives the idea of natural gas powered generators and shifts now, from furnace oil to natural gas and discards all the furnace oil powered generators it was just like throwing precious foreign exchange in dustbin. Will our scarce foreign exchange reserves bear the brunt of this shift? Even then, knowing, we have very limited sources of natural gas.
At the present situation, continuous and full supply of the gas is not possible, especially in the months of winter season, which causes losses to the industrialists and there is no redress of the grievances.
It clearly indicates the scarcity of this fuel. Further pressure on this limited source certainly will destroy the productivity of persons who are already using this fuel. It is estimated, the reserves would not be sufficient to meet the needs of the country after the year of 2010. What should happen at that time?
Once again it would be a new policy. All systems of natural gas powered generators would be discarded at that time. The nation will once again start its journey from zero. If this system continues, when will the nation reach the age of adulthood?
Now, our industrial sector is facing the challenges of WTO, China and India. This competition is necessary and for this, survival of the industry in Pakistan is necessary. Only proper and useful policies of the government can ensure the survival, growth and development of the industrial sector. This inconsistent and unanticipated policy is just like WMD (weapons of mass destruction). The target of this WMD is none other than the nation of Pakistan.
(The writer is Chairman, FPCCI Standing Committee on "industrial promotion and facilitation.)
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