INTER-FUEL AND INTRA-FUEL SUBSTITUTION POSSIBILITIES IN THE MANUFACTURING SECTOR OF PAKISTAN

Eatzaz Ahmad and Muhammad Idrees*

Pakistan Journal of Applied Economics, 2000, vol. 16, 37-47

Abstract: For the past two decades or so, the manufacturing sector of Pakistan has been facing an energy crisis in one form or the other. While in the mid-1970s the prices of petroleum products increased significantly, the period of 1980s was marked by severe shortages of electricity supply, which had to be managed by load-shedding. Since energy is an important factor of production, I the shortage of energy, especially electricity, in the recent past has been a major hindrance to the growth of the manufacturing sector in Pakistan. The power shortage crisis of the 1980s was overcome partly by replacing consumption quotas with rationing through prohibitive price increases and partly by successfully attracting direct foreign investment in the power sector. With the introduction of private power producers, though the supply bottlenecks are removed, the price of electricity is expected to rise further in the light of the high procurement price agreed with the independent power producers. Nevertheless, it was the oil price shocks in the mid-1970s coupled with the movement to protect the environment that aroused interest in energy economics. Following the worldwide trend, several studies have also been conducted in Pakistan to investigate prospects of substituting energy for other factor inputs.

Date: 2000
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