The Engineering Development Board (EDB) of the Ministry of Industries & Production has been assigned the responsibility of preparing, in collaboration with the Ministry of Energy - Power Division, a comprehensive Power Sector Indigenization Plan (PSIP) under the National Electricity Policy 2021 and the National Electricity Plan 2023-2027.
The latest Integrated Generation Capacity Expansion Plan (IGCEP) 2024-2034 is an integral component of this broader initiative. The timeline for the development of the PSIP, a ten-year prospective plan, was set for June 30, 2024, to be approved by the government.
However, the preparation of the draft plan remains in its initial stages, raising concerns about the timely execution of this crucial initiative.
A key guiding principle of the National Electricity Policy 2021 is the adoption of a “multi-pronged approach for indigenization,” which encompasses promoting local content, technology transfer, and research & development (R&D) across the power sector value chain.
The government, under this policy framework, pledged to facilitate the creation of development funds to support domestic R&D and allocate resources for augmenting indigenous capacity. However, despite four years since the policy’s announcement, no substantial progress has been made in this regard by the Ministry of Energy.
Similarly, the National Electricity Plan 2023-2027 has set the ambitious goal of enhancing the “indigenization of the technological hemisphere,” which is deemed a critical component for ensuring self-sufficiency. According to the plan, the EDB, with assistance from designated entities and relevant stakeholders, was to develop the PSIP by June 2024.
The PSIP was envisioned to progressively increase the share of indigenous equipment and components in the power sector by setting high-level targets for local content and identifying requisite actions, including legislative support, standardization, certification, technological upgrades, and incentive structures.
Under this plan, the government aims to achieve substantial import substitution, optimize localization, facilitate the acquisition of modern technology, and increase the export potential of electromechanical power equipment.
The ten-year PSIP framework is intended to support the local development of key power equipment such as transformers, switchgear, insulators, towers, energy meters, and other generation and transmission-related components.
Based on this framework, the government intends to devise strategies aimed at reducing reliance on imports and expanding export opportunities to strengthen Pakistan’s overall capital goods and engineering sector.
The PSIP aligns with the prime objective of the EDB, which was established in 1995 to create a conducive environment for the development of Pakistan’s engineering sector, particularly in steel and heavy engineering.
The EDB was tasked with developing a robust foundation for import substitution and promoting the export of engineering goods through product diversification and technological acquisition.
In its initial years, the EDB played a pivotal role in the rapid development of the automobile sector by implementing a Deletion Programme, which mandated manufacturers and assemblers to progressively replace imported auto parts with domestically produced components.
The Deletion Programme proved successful in certain industries, particularly in the tractor manufacturing sector, where localization levels reached over 80%. In contrast, localization levels for motor cars and commercial vehicles initially ranged between 50% and 60% but have since declined to approximately 30% for the new makes and models, primarily due to revised government policies to comply with global restrictions and attract foreign investment.
Unfortunately, in later years, the EDB was diverted towards non-engineering sectors, such as soap and chemical industries, at the expense of the engineering sector, leading to stagnation in indigenization efforts and an abysmally low export volume of engineering goods.
The engineering industry can play a critical role in the national energy sector, particularly in power generation and distribution. Currently, both the formal and informal sectors of Pakistan’s engineering industry manufacture transformers, generators, power boilers, electric motors, and circuit breakers that meet international quality standards. With existing production facilities and available technology, local manufacturers can achieve 30%-35% indigenization by value and an even higher percentage by weight for power projects across different technologies.
At present, a significant portion of power generation equipment for hydropower, thermal, solar, and wind energy projects is being imported from various sources. Enhancing the local production of precision and high-value-added equipment is thus essential for Pakistan’s future energy development.
Historically, the local industry has manufactured and supplied various equipment, components, and spare-parts for the power sector. Heavy Mechanical Complex (HMC) alone has supplied over 35,000 tons of equipment for power plant projects.
In 1991, critical equipment for the Boiler Package of Bin Qasim Thermal Power Plant (units 3, 4, 5, and 6, each with a capacity of 210 MW) for KESC (now K-Electric), was produced under a consortium with Hitachi, Japan, and Deutsche Babcock, Germany (now Babcock Borsig). Similarly, a significant portion of the machinery and equipment for WAPDA’s Muzaffargarh Power Station Extension (unit 4 of 320 MW) was manufactured and installed locally, with the Chinese serving as the Engineering, Procurement, and Construction (EPC) contractors.
The updated List of Locally Manufactured Goods, as per CGO-04/2022, provides detailed information about domestically produced equipment for the power sector. Local industries supply a range of equipment, including transformers, switchgear, control panels, cables, and material handling systems. Moreover, international manufacturers have previously evaluated and recognized the potential of Pakistan’s engineering industry. For instance, in 1992, GEC Alsthom, France (now Alstom) and Deutsche Babcock (Germany) agreed to collaborate with local industries for thermal power plant projects.
Likewise, in 1993, General Electric (USA) and Cockrill Mechanical Industries (Belgium) had planned to develop a combined cycle thermal power plant in Pakistan under a technology transfer arrangement, targeting a 30% by value localization level in machinery and technical services.
Unfortunately, policy shifts and government changes hindered progress on these initiatives. Instead, the government promoted turnkey thermal power plants, which relied entirely on imported machinery. In the hydropower sector, Sulzer Escher Wyss (now Andritz Hydro) of Switzerland collaborated with local industries in the mid-1980s to supply several small hydropower stations in Gilgit-Baltistan, which continue to operate successfully.
The company had also planned joint manufacturing of small hydropower plants up to 25 MW, but these plans were never realized. Similarly, Vestas, a global leader in wind power equipment from Denmark, had agreed to establish a facility in Karachi for progressive joint manufacturing of wind turbines. However, this project, too, failed to materialize.
To make the PSIP meaningful, the EDB must focus on creating enabling environments by restricting the import of turnkey power plants and instead supporting local engineering industries. The policy framework should emphasize financial and fiscal measures to promote indigenization as envisioned in national energy policies.
Action plans should focus on the local development of complete power plants, implementing phased indigenization strategies under technology transfer arrangements or joint ventures with foreign manufacturers. Whether through collaboration with Western sources for advanced technology or with Chinese firms for cost-effective solutions, Pakistan must prioritize self-reliance in the power sector.
This approach will be critical in achieving the goals of electricity affordability, energy security, and sustainability, particularly as Pakistan transitions from fossil-fuel-based power generation to green and renewable energy solutions.
Copyright Business Recorder, 2025
The writer is retired Chairman of the State Engineering Corporation
Comments