Govt ‘wastes’ Rs3.5tr yearly on energy imports

ISLAMABAD: Pakistan is wasting Rs3.5 trillion annually — more than three times the federal development budget — on unnecessary, rising energy-sector imports due to mismanagement, delays in adopting building codes, and failure to implement an indigenisation plan for energy materials and equipment that used to be produced locally.

This was the crux of an event on ‘Pakistan’s Energy Security’, organised by the LUMS Energy Institute (LEI) and attended by National Grid Pakistan (NGP) Chairman Dr Fiaz Chaudhry, Chief Executive Officer of the Independent System and Market Operator Dr Masood Ahmad, and NGP CEO Altaf Hussain Malik, among others.

LEI research reported that despite generation capacity exceeding 36,000MW, Pakistan’s base electricity load of about 8,000MW did not grow between 2015 and 2023, particularly in the four winter months, even as the country’s population grew.

“This means we are getting poorer as a nation” in terms of energy, said Dr Chaudhry, adding that most of the capacity addition was made for ‘cooling buildings’ that remained unutilised for most of the year resulting in higher capacity payments and circular debt.

Experts cite mismanagement, delayed building codes and ignored local manufacturing as key reasons

Conversely, the country imports $2.7bn worth of liquefied natural gas (LNG) for four winter months for space and water heating as most of the electricity capacity remains unused.

The LEI reported that the federal government had approved energy conservation building code in 2023 which could have reduced cooling load by 51pc but the provincial governments of Punjab, Sindh and Balochistan have not yet even adopted these codes and hence implementation remained out of question.

The Capital Development Authority (CDA) and Khyber Pakhtunkhwa government had adopted the new building code and were now in different stages of implementation.

LEI research team of technical experts Umar Farooq and Faisal Javaid Mughal reported that Pakistan could achieve substantial economic savings, improve electricity affordability and strengthen long-term energy security through integrated system planning, energy efficiency, renewable energy integration and indigenous manufacturing.

Dr Chaudhry, who is also a senior advisor at LEI, was the first to warn of a looming ‘capacity trap’ in 2014-15 over the induction of unnecessary power generation and was removed from the NGP. He said critical sectoral gaps had been identified through evidence-based research to provide technical support to public-sector institutions for informed policy-making and integrated system planning.

This was reported to have delivered approximately $17bn in projected savings from revised least-cost generation planning. LEI’s research indicated that improving energy efficiency in just 25pc of residential buildings could reduce peak electricity demand by approximately 3,000MW and yield potential annual energy-cost savings of Rs442.6bn.

The study on Net Zero Transition highlighted a modelled pathway to near-complete power-sector decarbonisation, reducing fossil-fuel generation from 49pc in FY24 to approximately 1pc by FY40, with hydropower contributing 47pc, wind 25pc, nuclear 18pc and solar 8pc.

LEI experts presented findings from a power-sector indigenisation assessment, identifying approximately Rs1.1 trillion in potential indigenisation opportunities against Rs1.9tr in projected equipment demand across Pakistan’s transmission and distribution sectors.

The assessment highlighted substantial localisation potential, evaluated the manufacturing readiness of approximately 49 local manufacturers, and outlined a proposed structure for an indigenisation roadmap. They said many of these plants, equipment, and spares used to be produced locally before the Wapda unbundling in 1998, but the capacity was later wasted, and reliance shifted to imported conductors, switches, and other equipment. This also caused massive foreign exchange losses, which could be avoided by reverting to localisation.

The experts also pointed out that the Engineering Development Board-led team was required to announce electricity equipment indigenisation by June 2026 under the National Electricity Policy 2023, but this did not materialise. LEI urged designated government entities to expedite the long-delayed Power Sector Indigenisation Plan (PSIP) to strengthen domestic manufacturing and reduce import dependence.

Published in Dawn, November 6th, 2026

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