Upcoming energy policy should be followed in letter and spirit and have a vision of next 30 years

Present government will slowly but surely adjust grave energy problems
Interview with Junaid Esmail Makda – President, Karachi Chamber of Commerce & Industry

PAGE: Tell me something about yourself and your organization, please:

Junaid Esmail Makda: Besides being the President of Karachi Chamber of Commerce and Industry, I am also the Chief Executive Officer of Makda Group of Companies, which comprises of Makda (Pvt) Ltd, Gaseous Distribution Company (Pvt) Ltd (GDCL), Makda Industries, Makda Enterprise, Friends Real Estate, Friends Packages, Friends CNG, Fuel Star Service Station and Makda CNG Services. Since 1980, I am in knitwear and woven business, managing, administering, procuring all types of textile requirements from yarn to exports. One of my companies is also engaged in sourcing and representation of international companies.

I am also in CNG and Real Estate Business and one of my companies imports and exports chemicals & general commodities. Moreover, I have also offered my services from time to time as member for Karachi Water & Sewerage Board (KW&SB), Sectoral Advisory Committee, Environment Climate Change & Coastal Development Department, Government of Sindh, Provincial Steering Committee, Services, General Administration & Coordination Department, Government of Sindh, Karachi Metropolitan Corporation (KMC), Sindh Solid Waste Management Board, Government of Sindh, Industrial Liaison Committee, Industries & Commerce Department, Government of Sindh, Coordination Committee, Labor & Human Resources Department, Government of Sindh, and National Centre for Dispute Resolution (NCDR).

Furthermore, I also worked dedicatedly for following organizations from time to time

• President, Pak Afghan joint Chamber of Commerce & Industry (PAJCCI)
• Patron in Chief, All Pakistan CNG Forum (APF)
• Director, PHMA – Institute of Knitwear Technology, Karachi (PHMA-IKTK)
• Member International Chambers of Commerce (ICC) National Committee Pakistan Chapter
• Chairman, KCCI’s International Affairs – Liaison with International Chambers formation of joint Chambers and MOUs implementation of Karachi Chamber of Commerce & Industry (KCCI)
• Former Executive Committee Member of Federation of Pakistan Chamber of Commerce & Industry
• Member Advisory Committee on Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
• Former Chairman/ Director, Pakistan Hosiery Manufacturers & Exporters Association (PHMA)
• Honorary Secretary, Dhoraji Cooperative Housing Society
• Honorary Secretary, Dhoraji Housing & Relief Trust
• Director, SITE Industrial Estate Limited
• Former President, SITE Association of Industry
• General Council Member of ICC World Chambers Federation (WCF)
• Life Member SAARC Chamber of Commerce & Industry
• Life Member Karachi Club
• Chairman, Special Committee Bombay-Karachi joint Chamber of Commerce & Industry
• Chief Coordinator, Commissioner–Karachi Chamber Liaison Committee (CCLC)
• Coordinator, Governing Body Police Chamber Liaison Committee (PCLC)
• Managing Director, Pakistan Hosiery & Textiles Manufacturers Inc., USA
• Former Chairman, Steering Committee on Espire Project Bavarian Employers‘ Association (bfz) GmbH
• Chief Coordinator, Pakistan Hosiery Manufacturers & Exporters Association
• Chairman to represent on USAID Pakistan Firms Project
• Former Director, Sindh Board of Investment SBOI
• Former Vice-President / Director, Karachi Chamber of Commerce & Industry
• Former Chairman, Pakistan Hosiery Manufacturers & Exporters Association
• Former Central Chairman, All Pakistan CNG Association. (Founder Member)
• Chairman, Industry, Investment and Privatization, Karachi Chamber of Commerce & Industry
• Chairman Sub-Committee on Estate Management, Legal Affairs and Hospital of Karachi Chamber of Commerce & Industry (KCCI)
• Chief, Governing Body Police Chamber Liaison Committee (PCLC)
• Coordinator City District Govt. – Chamber Liaison Committee. (CGCLC)

PAGE:  What are the recommendations by KCCI for the energy policy of Pakistan?

Junaid Esmail Makda: Pakistan has considerably suffered in the energy sector due to both its unbalanced policies and non-implementation of those policies, resulting in repetitive power crises. Pakistan used to produce power in the hydel-to-thermal ratio of 70:30 in 60s, while the opposite is prevalent in current times. Countries with sound industrial bases have ensured that their energy mix is based upon indigenous resources that offer the best comparative advantages. Sadly, for an energy deficient country like Pakistan, this is not true. Its mix is mostly dependent upon costly imported fuel, which is susceptible firstly to price fluctuations in the international markets and then to parity of the PKR to the USD. Further, to promote investment in the energy sector, indigenous production of thermal fuel is also indexed to international USD based prices, thus negating the advantages of indignity. The result is exorbitantly high costs of energy (whether gas or electricity) which makes our exports uncompetitive and local production being unable to match the prices of imported items, that in turn disincentives manufacturers to enhance productivity and incorporate value addition in their processes.

Pakistan’s current energy mix stands at thermal (which includes oil, gas, and coal) 65.5%, hydel 28%, nuclear 3.1%, and renewable energy (wind, solar, and bagasse) 3.4%. This is common understanding that environment friendly, cheap and indigenous resources like hydel, and renewables should have the top priority in national energy policy making. It is an irony that no new major dams/water reservoirs have been constructed since the last many decades, and whatever progress has been achieved in the renewable sector is miniscule at the moment.

The energy mix should incorporate hydel (40%), renewables (10%), Oil and gas 25% and coal 10% (thermal 35% in total) and nuclear 10%. A new energy policy is soon to be finalized; whatever energy policy the government comes up with should be followed in letter and spirit and should have a vision of next 30 years. For electricity provision, the government is aware that it is not power generation that is the lone cause of concern but it is also the antiquated transmission and distribution system that needs serious attention. In fact, one of the major reason for the circular debt, which has plagued the country’s energy chain is the enormous amount of ongoing power theft which continues unhindered to this day. Hence policies should also focus on improvement and modernization of this infrastructure as well for sustaining economic growth.

[ads1]

 

PAGE: Kindly tell us about the industrial losses due to expensive energy in Pakistan:

Junaid Esmail Makda: The gravest issue currently faced by the industrial community is that the industry needs uninterrupted gas and power supply and lower cost of utilities which would undoubtedly support all spheres of the sector. In fact, one of the major reasons for Pakistan’s uncompetitive exports is its exorbitant energy prices and inconsistency in its provision. The recent example of gas curtailment to industries in Karachi is a case in point. Article 158 of the Constitution clearly states the province in which a well-head of natural gas is situated shall have precedence over other parts of Pakistan. Sindh produces 2,600 to 2,700 mmcfd daily against which it was being provided a quota of 1,000 to 1,100 mmcfd. Sindh is being robbed of its right as the province receives a lot less gas than it produces and deserves. The CNG sector is also a victim of this anomaly whereby billions of rupees of investment has been made to suffer in the wake of abrupt government decision making. Overtime, the industry has been segregated into two sectors: domestic and export oriented. The fact that there is a discrimination in rates of utilities and import duties between them is causing selective companies to grow. Furthermore, given the fact that a majority of Pakistan’s economic activity is generated in Karachi, manufacturing units here should not be deprived of energy at any cost. Electricity cuts combined with gas shortages have severely affected industries. Frequently recurring problems in the energy sector are also a major deterrent in attracting investment (both local and international) and contributes to higher unemployment due to closure of industries. This ultimately damages Pakistan’s GDP and its growth.

PAGE:  Do you think the energy policy of the incumbent government would be business-friendly?

Junaid Esmail Makda: The initial period of the current government has not been free of troubles with regards to energy issues. As I mentioned, Karachi has only recently been a victim of gas curtailment. There have been reports that a reason for the reduction in gas supply to the city was diversion of the fossil fuel to fertilizer plants, in violation of previously decided priority list. I feel that the government policies should not be skewed in favor on certain sectors only. Although agriculture is the backbone of the country, the manufacturing sector also contributes a similar share to the country’s GDP and hence should be considered on an equal footing with other sectors with respect to energy provision.

However, I am optimistic that the government would gradually adjust to the long pending problems facing the economy, and that it would settle down after initial hiccups.

What is encouraging is that members of the government’s core economic team are in constant direct contact with the business community. Despite battling with various problems, including a balance of payments crisis, Prime Minister Imran Khan, President Arif Alvi, Finance Minister Asad Umer, Advisor to Prime Minister on Commerce Abdul Razzak Dawood and Sindh Minister Imran Ismail have been in regular touch with KCCI. They have given sympathetic hearing to the genuine issues of the business community, have taken into consideration various recommendations and have even resolved a number of problems. Things may not be immediately moving towards the better but it is clear that the government is trying its best to boost business activity and exports. On its part, KCCI has been preserving with its mandate of effectively representing the business community and has been consistently raising its voice since the last two decades to ensure that the business community does not have to compromise in any way.

PAGE: How would you comment on the business activities in Karachi?

Junaid Esmail Makda: Karachi has always been a city of resilience. No matter what time has thrown at it, its citizens have endured and moved on. Even when in the recent past, the city was plagued by the poorest form of law and order conditions and a deteriorating economy, its inhabitants were keen to grow their businesses. Currently, Karachi is going through new ordeals. The recent anti encroachment drive designed to free the city from the illegal land utilization took a dangerous turn wherein a number of businessmen lost their businesses even though they were in legal possession of the property. Loss of business premises made thousands jobless, in turn causing a wide spread slowdown in commercial activities in this economic hub of the country. Furthermore, the government had to take many measures to counter a balance of payment crisis, resulting in abrupt hefty devaluation of the PKR, drastic enhancement in taxes and duties on many an import item. This has significantly raised the cost of business and combined with SBP’s continuous policy rate hikes, has shaken the confidence of the business community. Yet I am hopeful that the government would soon gain a strong footing in its struggles of economic stabilization and that business in Karachi would flourish as usual in the near future.