Heavy engineering industry -- its role and status.
The development of a self-reliant economy is of prime importance for any country. A country aiming at raising the standard of living of its people and wishing to maintain that standard, just can not afford to ignore the development of its capital goods industry which acts as a catalyst for all growth centres in the economy. The plans for manufacture of capital goods are both generally and particularly related to growth of industries that they serve, but the method of establishing that linkage may vary from country to country.
In development plans, generally considerable emphasis is laid on accelerated industrialisation and development of capital goods industry which is often linked directly with socio-economic uplift of the country.
When Pakistan emerged on the map of the world as an independent country in 1947, it was basically an agrarian society with only two major engineering units worth mentioning namely Batala Engineering Company under private management and Moghalpura Workshop run by Pakistan Railways. The development of engineering industry in the early years of Pakistan has been slow and unsatisfactory. Subsequently light engineering and medium size engineering industry grew in private sector mainly during 2nd and 3rd five year plans with low technological levels producing diesel engines, pumps, farm, implements, cold storage and ice plants, flour and rice mills, textile mill machinery, cotton ginning plants, baling presses, machine tools etc. Therefore Pakistan mostly depended for its requirements on imported equipment and technologies. For socio-economic development, policies were formulated to accelerate the pace of industrialisation in the country with available natural and human resources to attain better standard of living, providing opportunities of gainful employment, higher incomes, increasing value-added content in manufacturing associated with transfer of high level technologies and technical know-how etc. Another major goal of industrialisation has been to strenghthen the linkages of industrial sector within the economy. This is sought to be achieved by developing on the one hand, agro and mineral based industries and on the other hand, by creating domestic capacity to manufacture capital engineering goods and intermediary products required by other sectors of economy.
The first industrial policy statement was issued in 1948. This under scored the objectives and outlined the strategy of industrialization appropriate for a newly independent national determined to change the prediminantly agricultural character of its economy. Private sector was the main vehicle for industrial investment during the fifties and sixties. PIDC during 3rd five year plan was given the mandate to set-up capital goods industry in the public sector with high technological level. During 3rd five year plan the emphasis was shifted from consumer goods industries to capital goods industries in the country when capital goods import had assumed an alarmingly high proportion i.e. about 50 per cent of the total imports. The main reasons for public sector appearing on the scene for establishing heavy engineering industries were:-
- Long gestation period.
- Heavy investment
- Expected losses in the initial years of operation.
- Requirement of infrastructure.
The general pattern of development of capital goods industry in any country is almost identical. First process industries are developed with simultaneous building up of light engineering industry to provide service to such industries. When the demand of process industries like sugar and cement plants, chemical plant, fertilizer plants, paper and pulp plants, iron and steel industry thermal power plants, sufficiently builds up, the need for self reliance in plant manufacturing is badly felt. This leads to development of heavy engineering industry for manufacturing a variety of capital goods. This includes:
a) Heavy Metal fabrication and machining industry for process plant fabrication and energy related equipment.
b) Machine Tool Building
c) Diesel Engines for farm, tractors and power driven implements and irrigation.
d) Crawler type earthmoving equipment for land building and roads construction.
e) Road rollers asphalt plant etc. for road construction.
f) Equipment for Power Generation
g) Equipment for Material handling
h) Automobiles and its spares.
i) Steel Industry and its spares.
j) Heavy Electrical Equipment
The integrated operations of Heavy Engineering Industry require skill in many areas such as design and engineering, manufacturing, procurement, sub-contracting, quality assurance etc. A block diagram given at Annexure-I shows the linkages between various factors and represents the complexity of operations of a Heavy Engineering Industry. Heavy Engineering Industry can not be set up in isolation and that simultaneously support services have also to be developed. One of the major requirements is the Development of Engineering and Contracting Capability.
The first heavy engineering unit viz Karachi Shipyard and Engineering Works Limited (KSEW) was established in 1954 and after a gap of 14 years Pakistan Machine Tool Factory was set up in 1968 and then Heavy Mechanical Complex in 1971. Heavy Foundry and Forge Limited came into operation in 1977. To this trend a new impetus was added with the commissioning of Pakistan Steel in 1984.
With the setting up of above mentioned units over a period of about 15 years potential has been created for the manufacturing of a wide range of capital goods. Today Pakistan is capable of producing basic metals from iron ore (serving as raw material for many industries), complete plants on turn-key basis, construction machinery, material handling equipment, machine tools, electric motors, switchgears, transport equipment, cargo ships, fishing trawlers etc).
According to a survey conducted by World Bank consultants, the total out-put of the engineering industries amounted to Rs. 33.385 Billion during 1985-86 which included out-put of only Rs. 3.265 Billion contributed by capital goods sector. The value added in this sector was about 30 per cent. The total demand of capital goods during 1985-86 was reported as Rs. 13.602 Billion, the local industry meeting only about 30 per cent of the total requirement.
The demand of engineering goods presently is around Rs. 70 billion, 60 per cent of which is being met through imports consuming about 65 per cent of total export earning of Pakistan. It has been estimated, that during current five year plan period, the demand for engineering goods will increase to Rs. 93 billion per annum. If the appropriate policy measures are not adopted, the large scale import of plant and machinery in the coming years will put an unbearable burden on the foreign exchange resources of the country and thus prove to be a major impediment in the desirable growth of economy of the country. The situation therefore warrants that revolutionary policy changes are introduced to provide adequate support to the local engineering industry which is at threshold of a breakthrough which will not come about through half-hearted measures.
Main institutional consumers of engineering goods, particularly of heavy electrical and mechanical equipment, are Government departments and autonomous bodies like WAPDA, KESC, Railways, PNSC and defence forces. The purchasing policies of these institutions are not conducive to the growth of local engineering industry particularly smaller units. Most of these institutions prefer to buy from foreign sources as duty free imports are allowed to them for development purposes. This factor puts the local industry at an obvious cost disadvantage. While taking such steps, no consideration is given to the fact that significant amount of foreign exchange is being drained out of the country. Furthermore, these institutions usually decide to ignore the government directive for allowing a 15 per cent price premium to locally manufactured goods.
Although the development of vitally important organizations like Pakistan Atomic Energy Commission and defence production installations was really the need of the hour and have served the country in many ways, this however has made very small contribution towards the development of capital goods industry. These budget funded organizations instead of engaging the engineering units of the country to serve them as suppliers of different equipment and machinery which they need during the course of their development, have in fact resorted to import of machinery/equipment and the spares almost completely. They generally fall back on the local industry for the development of only those equipment which is refused to them by the sellers in the international markets.
The development and growth of the capital goods industry depends primarily on the state of technological development of the country, and for this reason the acquisition and development of technologies is an important basic requirement for theindustrialisation of developing countries like Pakistan. The developed countries have reached their present level of technological advancement through a long drawn process of trial and error and continuous efforts in research and development. Their initial advantage in technology leading to low cost high volume production gave them an easy access to markets in various countries of the world. The low value imports of primary commodities from the under0developed countries were, with the application of advanced technologies, onverted into high value exports. This phenomenon has led to a massive transfer of wealth from the under developed countries to developed countries. The fast widening technological gap between the developing countries has come to be recognized as one of the important factors explaining the existing disparities in their income levels, growth rates and economic advancement.
In order to develop heavy engineering industry in Pakistan capable of catering to the need of various industrial sub-sectors, user groups and other sectors of the economy, a point has to be reached where the volume of imports of Engineering Goods is brought to a bare minimum level. It is, from the pure economic point of view, to better produce engineering goods through indigenous efforts, at nominally higher costs, and with lower quality than to halt development of engineering industry. After all, as development in the manufacture of capital goods proceeds, the quality of products will steadily improve.
The development of heavy engineering industry should be seen in a context of crisis and challenges as represented by the current perod and those likely to be confronted in future.
The present industrial policy in Pakistan aims at accelerating the pace of industrialization with special emphasis on building up a heavy industry base. Given below is the resume of potential built up since independece with regard to various types and classification of capital goods.
Pakistan has to invest heavily on the development/improvement of infrastructure facilities such as roads and highways, dams and water reservoirs etc. These activities would need besides manual labour various construction machines. The construction industry at present is one of the largest single industry which employs large manpower. There is need to employ machinery in the construction industry no only to improve efficiency in this sector but also for reasons of shortage of skilled manpower.
Construction machinery being manufactured in the county includes road rollers both stationary and vibratory types, mobile cranes, concrete mixers, asphalt mixing plants, stone crushjing and screeningplant, tar boilers etc. Most of the equipment is manufactured at HMC, Taxila.
At present the facilities for manufacture of heavy construction equipment are almost non-existent. In spite of the fact that the country has built up sufficient industrial potential, the required technological knowhow for the manufactured of such sophisticated machinery is not yet available. SEC in he past had entered into a collaboration agreement with one of the leading manufacturers of construction machinery but the project was shelved for lack of finances. The project has been reviewed recently and SEC is trying to enter into a deal on partnership basis with a foreign construction equipment manufacturer.
Pakistan since its very inception is an agrarian society. It more or less maintains this status even today. It is estimated that more than 80 per cent of our farmers use only hand tools and animal drawn implements. Limited design and development work on such implements has been undertaken. Experience indicates that rapid and productive results could be obtained through use of technology.
There are about 250 units manufacturing agricultural machinery and implements, with a capacity of 1.38 million Nos. per annum such as wheat threshers, sugar cane crushers, chaff cutters, sprayers, rice hullers, rice husking machines, rice polishing machines, ploughs, drills, cultivators, plant protection equipment etc.
Millat Tractors Ltd Lahore was set up in the public sector in 1964 to make a beginning in the progressive manufacture of tractors and other agricultural implements. It started with an annual capacity of 10000 machines and after recent BMR has enhanced the capacity to 18000. It is producing the popular Massey Ferguson Tractors of 25, 50 and 63 Horse Power Capacities. The other two companies in private sector in tractor assembly/manufacturing business are:-
i) Fecto-Belarus established in 1982 By Fecto Group of Industries with Russian Collaboration. They assemble 55 Horse Power machines. Their capacity is assumed to be 5000 machines per year.
ii) Al-Ghazi Tractors Ltd. was established in 1983. They have collaboration with the World renowned FIAT Allis of Italy. They are producing three models of Fiat tractors. Their annual production capacity is 10,000 tractors. Pakistan has been exporting cultivators, ploughs, ginning machinery, wheat threshers, harvesting machinery and parts of various agricultural machinery to Saudi Arabia, Kuwait and Iran.
Pakistan at the same time has imported substantial quantity of agricultural machinery and implements such as ploughs, seeders/planters, harrows and cultivators, combines, lawn mowers, harvesting machines, etc. to meet the local demand.
The importance of the machine tools industry, is measured not so much in terms of its contribution to the income of a country but its value lies in direct and profound influence it exercises on the productivity and competitiveness of the vast industrial sector to which it supplies the major part of the means of production (almost a third of the investments of engineering sector is devoted to the purchase of machine tools). The machine tools industry plays a strategic economic role, so much so that most of the major industrialized countries devote considerable effort to promote its development. The largest Machine Tool manufacturers in the country are two public sector companies i.e. Pakistan Machine Tool Factor (PMTF) and Pakistan Engineering Company (PECO). The two companies have a share of the Machine Tool market of presently approximately 30 per cent. The remaining 70 per cent are shared by medium and small sized manufacturing units. The Machine Tools manufactured by above mentioned companies of SEC are of a satisfactory quality compared to international standards and one of the highest standards within the country. The Machine Tool Industry of the country is presently working a a capacity of 25-35 per cent.
Pakistan grows sugarcane in sufficiently large quantity (production during 1988-89 was estimated around o7 million tons), but only about 30 to 35 per cent is presently used for white sugar production. There are good prospects for expanding this agro-based industry. Although the country is believed to be now self-sufficient in sugar production, it will be desirable to set-up new sugar mills for meeting the future requirement arising out of an increase in population and demand of sugar in the export market.
HMC has achieved a significant breakthrough in this area and has developed the capability to undertake turnkey supply of complete sugar mills with a capacity upto 8,000 tons per day. It has so far supplied 14 sugar mills and two are in final stage of delivery to the home market. It has completed two sugar plants for customers in Indonesia and Bangladesh as well. These were the first ever large export orders for complete plants. Since HMC has got a foot-hold in the export market, it is planning to further enhance its capability by offering sugar plants of higher capacities using the most modern technologies. HMC can now deliver four sugar plants in a year. KSEW and Ittefaq have also established themselves as suppliers of complete sugar plants.
Chemical, Fertilizer and
An investment of about Rs. 26 billion was envisaged in the chemical, fertilizer and petro-chemical sectors during the Sixth Plan. Roughly 50 per cent of the investment (Rs. 13 billion) was to be the cost of the equipment. Most of the equipment was to be imported as it fell beyond manufacturing potential of the existing industry. Nevertheless, still a large portion of machinery such as low pressure vessels, heat exchanger and distillation column, evaporators, filters, driers, mixers, conveyors, platform tower cranes and workshop equipment etc. are within the capabilities of the existing engineering industry. HMC, KSEW and many other fabricating companies in the private sector can undertake supply of these equipment.
The present production capability of HMC for these equipment is limited. HMC is planning to install heavy plate rolling and welding equipment for producing vessels with wall thickness of 150 mm. With this balancing a large portion of machinery belonging to chemical, fertilizer and petro-chemical plants will fall within the manufacturing capability of HMC.
Cement machinery is among the major planned products of HMC, KSEW, Ittefaq Brothers and Descon are also planning to enter into this field. HMC has an edge in technology over the others. It can produce plants of 2000 to 3000 TPD capacity. HMC is presently manufacturing/supplying complete cement plant, on a turnkey basis, to private local customers. In the recent past HMC supplied three plants in the home market. HMC has signed an agreement on March 25, 1990 to supply cement making machinery to Bangladesh. The contracts for supply of two complete plants of 2000 TPD to the private sector organizations are likely to be finalized in near future.
Few export orders for cement plants are under negotiations. The foreign customers normally ask for higher capacity plants of 4000 TPD and above. HMC is planning to install certain balancing machinery to handle heavier modules of cement plants.
Power Generating Machinery
The energy consumption in Pakistan is growing at a fast rate. This explains the continous gap between demand and supply of energy in the country. In fact demand is growing faster than the supply which is causing the problem of electrical load shedding. This is a clear indicator of the tremendous potential which exists for the growth of the power industry in the country. The present per capita consumption of electricity is estimated to be around 170 KWH which is about 1/3rd of the consumption in similar developing countries like Turkey, Iran, Egypt, Iraq, Malaysia, etc. In order to fully satisfy the growing demand for electricity the "Power Generation" has been assigned high priority in the seventh five year plan.
During the sixth five year plan (1982-1987), the total allocation for the Energy Sector was Rs. 100 billion, for which about 50 per cent was earmarked for the Electrical Power Generation. The Power Sector in the Seventh Plan (1988-1993) accounts for 73 per cent of the investment by Public Sector in the Energy Sector. The present installed capacity for power generation and the planned capacity during Seventh Five Year Plan is shown as under:-
It would be observed from above that installed capacity for power generation is planned to be almost doubled during the Seventh Plan period. This would increase the per capita consumption of electricity from present 170 KWH to about 300 KWH by the year 1992-93. This appears to be a rather difficult target but nevertheless it is achievable considering the fact that Private Sector for the first time, has been allowed to invest in Power Plants. The public sector investment in the energy related projects is still dependent on foreign aid which is expected to continue in foreseeable future.
The country will have to curtail its heavy dependence on imported plant and machinery for power generation. The real break through will come about, when we are capable of producing our own power generation equipment and machinery by exploiting and enhancing the potential of local engineering industry. The units of State Engineering Corporation (SEC) have already made a modest start in this direction and they are planning to expand this activity to achieve maximum self reliance in this field, provided a national policy is developed and implemented to support the local industry.
HMC during sixth plan, planned its entry into the energy sector because of the priority given by the government to this sector and the resultant business opportunities thus available. It invested about Rs. 20 million in additional plant and machinery for producing components of Power Boilers. HMC also entered into technical collaboration with a world renowned firm Deutsche Babcock (DBW) of West Germany engaged in the manufacture of Power Boilers. HMC secured orders for the equipment for Power Boilers of Bin Qasim Thermal Units 3 and 4. HMC share was about 20 per cent by value but it manufactured about 50 per cent equipment by weight. This included high value added items like convection tube banks, super heater reheater and economizer coils, headers etc. HMC with its existing facilities can also manufacture items related to Turbine house which include water treatment plant, overhead cranes, steel structure etc. This can substantially increase share of HMC in the manufacture of Power equipment.
It is commendable that HMC has completed the job of Bin Qasim units 3 and 4 to the entire satisfaction of the customer as well as foreign partner. With this experience, HMC has made a big leap forward in the manufacture of high pressure parts for Power Boiler which operate at a pressure of about 2000 PSI.
The order for Bin Qasim unit 5 was given to Marubeni-Japan who had earlier built units 1 and 2. The successful completion of Bin Qasim units 3 and 4 gave confidence to Japanese in the capability of HMC and therefore they engaged them as their sub-contractor. This work has also been completed satisfactorily and ahead of schedule. HMC is now fully ready to prticipate in all forthcoming Power Projects in the country.
HMC is now seriously planning to further enhance its local content in Power Boilers. This would, however, need further investment. It is estimated that with this investment the company can increase its local share in boilers upto 50-60 per cent.
Oil and Gas Projects
Pakistan is fortunate that during Sixth Five Year Plan its efforts for search in oil and gas has met with considerable successes. The extraction of oil by the end of the plan i.e. 43000 barrels per day has exceeded the target of 21000 barrels per day. The success ratio in the drilling was close to 1:2.5 compared to 1:12 during the Fifth Plan. Consequently a total of 19 oil and 11 gas fields were discovered which added 117.3 million barrels of oil and 1.7 trillion cubic feet of gas to reserves. In view of the fast expansion of activities in the oil and gas sector HMC Taxila has also entered into the manufacturing of oil and gas processing equipment which are mostly installed at the well head. HMC completed its first order for oil and gas equipment in early 80's by supplying a sulphur recovery plant for the Meyal Oil fields. It completed another order for 50 MMCFD gas dehydration plant for Pirkoh Gas Company. The major breakthrough however came in 1985 when HMC signed a turn-key contract with OGDC for the supply of complete installation required for Dakhni oil and gas fields. The cost of this project exceeded Rs. 500 million and it included gas dehydration plant, gas sweetening plant, sulphur recovery plant, LPG/NGL recovery plant, crude stabilizing plant and utilities and off-site facilities. All the major mechanical equipment such as pressure vessels, towers, steel structures, piping spools etc. were fabricated by HMC. HMC is now capable of handling similar projects for OGDC. It is presently discussing with OGDC the possibility of contribution of HMC in Dhodak Development Project.
Mini Hydel Power Plants
HMC Taxila has acquired the technology for local manufacture of mini hydel plants with the technical assistance of Sulzer Escher Wyss of Switzerland who have experience of about 75 years in this field. HMC has so far completed the following schemes for the Northern Areas Public Works Department (NAPWD) during the period 1985-86.
HMC secured another contract from WAPDA for the supply of 4 hydel turbines and generating sets with capacity of 1 MW each for a total price of Rs. 32.5 million. These are Pelton type turbines and the local scope of manufacturing includes penstock, sliding gates, crane, transformer and HT and LT panels. The share of local supply was 65 per cent. This project is presently under completion. HMC is planning to gradually increase the share of local manufacturing through technology transfer from the foreign partner and it is expected that within 2-3 years components of the turbines would be manufactured locally e.g. Spiral Casing, inlet pipe and draft tube, Expansion joints, Head covers, Wicket gates, Runners, Penstock, Pipe etc.
The generator and other allied electrical equipment are already being manufactured by local companies like Siemens and PSL (another unit of SEC). HMC recently secured contract for the supply of plant and machinery for 32 mini hydel projects located in the Northern Areas. The total value of the contract is about Rs. 270 million. HMC has got this contract in collaboration with a British Firm i.e. Biwater Limited, who have assured complete technology transfer to HMC in this field.
Large Hydel Projects
As already mentioned Pakistan has large hydel resources for power generation which is estimated to be about 30,000 MW of which only 10 per cent is being exploited presently. The first phase of two giant projects namely Mangla and Tarbela has been completed and their expansion is in progress. It is expected that soon, decision will be taken on the fate of Kalabagh and Basha Dams. In view of the large potential in this area, HMC is planning to expand its production facilities for the manufacture of large components for hydel turbines and generators.
The hdyraulic turbine and generator consist of parts such as the turbine runners, shaft, draft tube, spiral casing stay ring, inlet valve, generator stator, field poles, rotor spider, wicket gates, bearing etc. Pakistan has a fairly developed heavy engineering base which can contribute to a certain degree towards indigenisation of large hydel turbines and generators. The local content can be further increased after balancing of facilities at Heavy Mechanical and Heavy Foundry and Forge.
The runner is one of the critical component of turbine and very few manufacturers specialize in its casting. For 100 MW unit it may weigh around 35 tons and has a diameter of about 4 meter for a 400 MW unit, the weight would still be higher which can not be presently handled by HMC. The main shaft is generally in three parts namely turbine, generator and exciter shafts with a diameter of about 1 to 1.5 meters. These shafts may weigh up to 50 tonnes. The heaviest forging that HMC can presently manufacture is only about 30 tons. There are plans to upgrade facilities of HMC which would enable it to handle heavy parts required for large hydel power plants. Pakistan can benefit from the experience of China in this field.
High Voltage Electrical Equipment,
(Power Transformers and Switchgear)
As already mentioned, power generation capacity of Pakistan is planned to be doubled by the end of Seventh Five Year Plan. It would approach a figure of 13100 MW. Increase in the growth of power generation is linked with demand of power transformers which are installed in high voltage sub-stations, as part of electrical transmission network. To meet the demand of power transformers, Heavy Electrical Complex (HEC) a project of SEC, is being set up in Hattar Industrial Area with the technical and financial assistance of Peoples Republic of China. The project envisages manufacture of eight types of power transformers with ratings of 5 to 40 MVA and for primary voltage of 66 and 132 KV. 148 power transformers of total capacity of 2885 MVA would be produced annually.
Heavy Electrical Complex provides important linkage with the production programme of other major industries of the country. Particular care has been taken to develop local sources for the supply of raw material and components. It is expected that about 50 per cent of raw material and components would be procured locally. HEC will be requiring annually 3200 tons of special grade transformer oil, 2,300 tons of mild steel plates for manufacture of transformer tanks and other components which are available locally. Transformer tanks and radiators will be fabricated at Heavy Mechanical Complex, while paper wrapped copper conductors and medium voltage bushings would be procured from other Pakistani manufacturers. It is expected that within a few years of the commencement of production, local sources will be developed for the supply of most of the remaining raw materials.
Presently, Pakistan is spending huge amount of foreign exchange on the import of power transformers. It is estimated that at optimum capacity HEC would save the country foreign exchange to the tune of Rs. 220 million. In addition facilities will be available in the country for the repair of these expensive, bulky and high technology products.
Apart from power transformers another company of SEC namely Pakistan Switchgear (PSL) is planning to manufacture high voltage switch gears of SF-6 type under joint venture with Energo-Invest of Yugoslavia. The project has been approved by the Government and its implementation is expected to start soon.
Nuclear Power Plants
HMC have potential to make significant contribution in the proposed programme of PAEC for the local manufacturing of nuclear power plants. They would however, need certain technological support and balancing of their facilities.
It is estimated that for a nuclear power plant about 330 pressure vessels, heat exchangers and storage tanks are required. About 74 per cent of such equipment belongs to non-nuclear category which can be manufactured by HMC and other similar local industries without much of problem. These are designed and manufactured to quality standards e.g. ASME code Vol. VIII, Division I and API 620.
HMC can attempt to manufacture in the next phase some of the heat-exchangers and pressure vessels which belong to seismic class 2 and 3 in accordance with ASME code Vol. III. The most critical parts of a nuclear power plant are the following:
1. Reactor - Calandaria - Pressure Tubes - End fittings - Booster and Absorber rods.
2. Fuelling machine
3. Steam generator
5. Primary pump and piping
The reactor and steam generator vessels are very heavy weighing 200 and 85 tons respectively. These are manufactured to fine tolerances and they need special care in handling during manufacturing. HMC is planning to balance its facilities to expand the core business to thermal power plants, oil/gas equipment, fertilizer and petro-chemical plants etc. HMC would re-consider its requirement of balancing equipment in some areas to cater for the requirement of nuclear vessels, provided PAEC assures HMC of repetitive orders. HMC may not necessarily have to go for the type of heavy fabrication and machining facilities which European manufacturers have since their module of plants is higher. PAEC plans to adopt 600 MW module and as such HMC facilities will have to be planned accordingly for which close coordination is required with PAEC.
The capital goods industry is a difficult and complex sector. It demands a high level of investment in design and development as well as in the specialised manufacturing, tooling and work handling facilities.
The gulf between the demand and local production of engineering goods continues to be widening. The situation warrants that revolutionary policy changes are introduced to provide adequate support to the local engineering industry.
In order to frame policy recommendations the reasons for heavy dependence on imports should be analyzed. The main reasons for imports as compared to local production can be summarised as under:-
1. Our engineering goods industry despite having a fairly long history is still in the embryonic state of development and its technological level is not comparable to that of developed countries.
2. The cost of production is higher as compared to that of foreign competitors due to low volume of production, restricted market, adverse fiscal policies, high prices of raw materials and utilities, low labour productivity etc.
3. Most of the import of plant and machinery is against foreign loans, aids and barters. Pakistan has to accept import of plant and machinery in the form of package deal irrespective of its own manufacturing capability. If the engineering industry has to progress, all the doors (and back-doors) open for imports will have to be closed in respect of such products which are being produced or which can be produced in the country. As a matter of policy imports of all such products should be completely banned. This would help to create assured market to the local engineering industry. Where a complete ban is not possible import quota may be fixed as a measure of protection to indigenous engineering industry.
Unlike consumer/process industries, engineering industry relies more heavily on skilled manpower, sophisticated production machinery, a sound design base, development of know-how and quality assurance. Each of these elements are equally important for successful management and operation of an engineering enterprise. Unfortunately enough emphasis has not been paid to these critical factors which has hindered the development and growth of local engineering industry particularly in the private sector. There is need to launch crash training programmes in technical and management disciplines at the national level. The existing institutions imparting training need to be further strengthened. The indigenous design capability is at present quite limited. This needs to be reinforced through setting up of design institutions and through transfer of know-how from developed countries.
In order to penetrate competitive export markets, it is imperative that quality of engineering products is considerably improved. This can be achieved only if quality consciousness is developed throughout the industry, by imposition of quality standards and evolving mechanism to maintain the same. It is understood that quality awareness and product improvement can be brought about more forcefully through legislative means. The import substitution in case of plant and machinery such as chemical, petrochemicals, fertilizers, thermal power plants, oil/gas processing units different items of textile machinery etc. can be maximised through formation of joint ventures of local and foreign firms. Recently HMC in partnership with M/s Deutsche Babcock of West Germany secured a contract for the supply of two 650 ton per hour boilers for Bin Qasim units 3 and4. One of the main impediment in the success of such ventures is the correct determination of deletion prices of the locally produced items. The foreign supplier invariably tend to suppress the prices of the locally supplied items. A mechanism needs to be evolved for determining the price of local components with the help of local user agencies. The government may also consider prescribing a minimum limit for local procurement in international tenders floated by Government organizations like WAPDA, OGDC, Railways etc.
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|Title Annotation:||Engineering; heavy industries in Pakistan|
|Date:||Oct 1, 1990|
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