In the face of rising oil consumption and an import bills due to rising international prices government is considering the possibility of conserving fuel by reducing working hours a week. The goal is to save foreign exchange amount of $2.7 billion.
They are calculated upon three different scenarios of working hours and fuel conservation, which were formulated by the State Bank of Pakistan for the savings in foreign exchange between $1.5bn up to 2.7bn.
The total oil imports of Pakistan in the initial 10-month period (July-April) in the budget year (FY22) has surpassed $17 billion, indicating a huge increase of 96 percent compared to the same time last fiscal year. This includes imports of petroleum products valued at $8.5bn in addition to petroleum oil worth $4.2bn with 121pc and 75pc growth, respectively.
The increase isn’t solely due to an increase in the international price because the import volumes of crude and petroleum products are also increasing up to 24pc as well as 1.36pc and 1.36pc, respectively. The local refineries have also, ironically, during the time (July-April) were operating in a suboptimal manner as evidenced by an rise in crude imports as well as significant increases in petroleum products which is accompanied by higher import costs.
A senior official from the government said the appropriate authorities — the petroleum and power divisions were instructed to develop their own estimates, including the conservation of electricity to look at the issue in a comprehensive way, including cost-benefit analysis of all sectors before arriving at an answer.
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The central bank’s estimates was mainly based on POL (petroleum product) consumption during the normal weekday working hours which includes retail businesses, educational institutions and government offices that in all likelihood is when summer holidays are in effect. It didn’t include LNG imports that are mainly to the power sector. In the first 10 months of present fiscal year LNG imports totalled $3.7bn and showed an increase of 83pc even though the imports were lower.
These figures suggest that the additional POL usage for just one additional working day per week could cost the country about $642 million for commutes, which don’t include transportation and freight. However, less consumption due to one less day of work per week could result in a savings of approximately $2.1bn. The savings numbers include to be a an overall reduction in the import of oil however, the subsidy for petroleum products can also go down by Rs3.5bn per day.
In the first scenario, that is based on four working days and three holidays during which retail hours are open as weekends, the typical POL savings is estimated at $122 million a month or $1.5bn annually. It is worth noting that 90 percent of the oil consumed is assumed to be for working days and 10 percent is for holidays during the month.
In the second instance, that is based on four days of work including two holidays as well as an additional day in lockdown (retail to be shut for one day) The savings by reducing imports of oil is estimated to be $175 million per month, or $2.1bn annually.
The third option that is based upon four days of work, one day off and the two-day lockdown (commercial activities are unaffected over two weeks) The POL reduction in import costs could be as high as $230 million which is roughly $2.7bn. However, this scenario is deemed to be too harsh since it could affect the confidence of the public.
Officials stated that they were aware that the Power Division had advised the new government shortly following its election to reduce working hours and to limit commercial activities during daylight hours. They also suggested that the government begin a nationwide energy conservation campaign across all sectors of energy consumption, with an the possibility of saving more than 5500MW.
Premier Minister Shehbaz Sharif opted to extend working hours by six days instead of five days per week. This added cost in the form of increased electricity consumption and the use of POL.
Incredibly, the power shortage is currently ranging between 5000 and 7000MW, which can cause loads being cut off for up to three hours in the major cities, an official told me, adding that the gap could be between 3000 and 500MW. be easily put in low-revenue and high loss areas that can be regulated to avoid public protests.
