Pakistan Energy Imports Waste Rs3.5tr a Year

Pakistan energy imports waste Rs3.5 trillion every year, more than three times the federal development budget, because of mismanagement, delayed building codes and the failure to build energy equipment at home.

That was the finding presented at an event on Pakistan’s Energy Security, organised by the LUMS Energy Institute in Islamabad. The institute said the country keeps paying for energy-sector imports it does not need, while equipment that used to be made in Pakistan is now bought from abroad.

Power plants stand idle while gas is imported

LUMS research showed that generation capacity has crossed 36,000MW, yet the country’s base electricity load of about 8,000MW did not grow between 2015 and 2023. The flat load covered the four winter months in particular, even as the population grew.

“This means we are getting poorer as a nation” in energy terms, said Dr Fiaz Chaudhry, chairman of National Grid Pakistan and a senior adviser at the institute. He said most of the new capacity was added to cool buildings, and it stayed unused for most of the year. The result was higher capacity payments and more circular debt.

At the same time, the country imports $2.7 billion worth of liquefied natural gas for four winter months, mainly for space and water heating, while much of its electricity capacity sits idle.

Building codes that were never adopted

The federal government approved an energy conservation building code in 2023. The institute said the code could have cut cooling load by 51 per cent. Punjab, Sindh and Balochistan have not adopted it yet, so implementation never started there. The Capital Development Authority and the Khyber Pakhtunkhwa government have adopted the code and are at different stages of putting it into practice.

Dr Chaudhry was the first to warn of a looming capacity trap in 2014-15, when unnecessary power generation was being added. He was later removed from National Grid Pakistan. His institute’s research has since identified about $17 billion in projected savings from revised least-cost generation planning.

The researchers, Umar Farooq and Faisal Javaid Mughal, said better planning, energy efficiency, renewable energy and local manufacturing could cut costs, improve affordability and strengthen long-term energy security.

What efficiency alone could save

Improving energy efficiency in just 25 per cent of residential buildings could cut peak electricity demand by about 3,000MW and save Rs442.6 billion a year, the institute said.

Its Net Zero Transition study sets out a modelled path to near-complete decarbonisation of the power sector. Fossil-fuel generation would fall from 49 per cent in FY24 to about 1 per cent by FY40. Hydropower would supply 47 per cent, wind 25 per cent, nuclear 18 per cent and solar 8 per cent. Business Recorder, which also covered the dialogue, reported the study projects about 78 million tonnes of avoided carbon emissions.

The research also warned that distributed solar could push minimum demand on the national grid down to nearly 3,000MW. Battery demand could rise from 4 to 5 gigawatt-hours in 2025-26 to 45 to 50 gigawatt-hours by 2031, which strengthens the case for making batteries in Pakistan.

Cutting Pakistan energy imports by making equipment at home

The institute’s indigenisation assessment found about Rs1.1 trillion in potential local manufacturing opportunities, against Rs1.9 trillion in projected equipment demand across the transmission and distribution sectors. It assessed the manufacturing readiness of about 49 local firms and set out a proposed structure for an indigenisation roadmap.

Many of these items used to be made locally before Wapda was unbundled in 1998. That capacity was later wasted, and reliance shifted to imported conductors, switches and other equipment, at heavy foreign exchange cost.

An Engineering Development Board-led team was required to announce electricity equipment indigenisation by June 2026 under the National Electricity Policy 2023. It did not happen. The institute urged the designated government bodies to speed up the long-delayed Power Sector Indigenisation Plan.

Signs of movement on circular debt

The picture is not all bleak. Power Minister Sardar Awais Leghari said at the National Energy Summit on October 27 that circular debt had fallen by Rs780 billion, from Rs2.4 trillion to about Rs1.68 trillion, and its growth had been halted over the past two years. He said 76 per cent of grid electricity came from domestic resources last year, with a target of 94 per cent from local and lower-cost sources by 2036.

That fits with the wider reform effort. The government has an IMF-backed plan to tackle circular debt, and PSO’s profit doubled in the first quarter of FY27. The cost of failure is plain. A grid failure added Rs400 billion to electricity bills, and Punjab’s power firm sought a tariff hike at a Nepra hearing.

The LUMS findings were reported by Dawn and Business Recorder.

Frequently asked questions

How much does Pakistan waste on energy imports each year?

Pakistan wastes Rs3.5 trillion a year on unnecessary and rising energy-sector imports, according to LUMS Energy Institute research. That is more than three times the federal development budget.

Why does Pakistan import LNG in winter?

The country imports $2.7 billion of liquefied natural gas for four winter months, mainly for space and water heating, even though much of its electricity generation capacity stays unused in the same months.

What would building codes change?

The energy conservation building code approved in 2023 could cut cooling load by 51 per cent. Punjab, Sindh and Balochistan have not adopted it yet, while the Capital Development Authority and Khyber Pakhtunkhwa have.

How much could efficiency save?

Improving energy efficiency in 25 per cent of residential buildings could cut peak demand by about 3,000MW and save Rs442.6 billion a year, the institute said.

What is the Power Sector Indigenisation Plan?

It is a long-delayed plan under the National Electricity Policy 2023 to build power equipment in Pakistan instead of importing it. The institute found about Rs1.1 trillion in local manufacturing opportunities against Rs1.9 trillion in projected demand.