• PIDE survey reveals 83pc firms link inability to meet targets with lack of power
• 78pc companies say electricity scarcity hinders operational efficiency

ISLAMABAD: Despite surplus power generation capacity, most of the country’s engineering firms have held electricity scarcity and its poor supply responsible for their inability to meet production goals and achieve operational efficiency, thus losing competitiveness, whereas 95 per cent firms reported no access to finance.

This has been disclosed by the state-run Pakistan Institute of Development Economics (PIDE) in a study spearheaded by its vice chancellor, Dr Nadeemul Haque. The study — based on a representative survey of 328 engineering firms from across the Golden Triangle of Lahore, Gujrat and Gujranwala — revealed compelling statistics that underscore the critical concerns affecting the industry’s growth and productivity.

One of the foremost issues outlined in the report is the severe impact of electricity unavailability on daily production targets. Some 83pc firms said the unavailability of electricity created hurdles in achieving their production goals, resulting in a gap between demand and supply.

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Some 78pc firms reported that electricity scarcity hindered their operational efficiency, a crucial factor where economies of scale need to be achieved.

Load-shedding and voltage fluctuations further exacerbate the challenges by increasing the risk of machinery malfunctions and damage, affecting 68pc of the firms. The financial strain of arranging alternate supply, amounting to Rs71,000 per unit annually, added to the burden on firms’ operations, impacting 72pc of the surveyed companies.

The report also found a lack of an online presence among Pakistani engineering enterprises. With 63pc of surveyed firms lacking any online presence, businesses need to establish themselves online to reach a wider customer base and enhance engagement, it said.

The study also reveals that while a significant portion of firms (63pc) show no intent to expand in the coming years, a proactive minority plans to invest in advanced technology, machinery, land and skilled labour to boost their business prospects.

Another shocking aspect brought up by the survey was the lack of access to credit for most firms, mainly because of inadequate collateral to secure loans due to their small size. This reduces their marketability to commercial lenders and has resulted in only 5pc of the surveyed firms having loans or lines of credit, thus hampering the industry’s growth potential.

The results also indicate that 66pc of the 328 firms surveyed are sole proprietorships, 20pc are private limited and 14pc are partnerships. Most firms specialise in manufacturing items such as auto parts, fans, steel, kitchen accessories, electrical and electronic equipment, machines (water pump/laundry), and sanitary products.

Besides, 57pc firms are not members of any professional body, with 14pc being members of the Engineering Development Board (EDB), 5pc of the Pakistan Engineering Council (PEC), and 24pc of other local or small associations.

As for quality standards, only 1pc firms are certified by the International Standard Organisation (ISO), 2pc have certifications from the Pakistan Standards and Quality Control Authority (PSQCA), and around 10pc firms have local certifications. “Astonishingly, around 87pc firms have no quality certifications,” PIDE noted.

On a healthy note, the survey found that 79pc firms comply with labour laws. However, 89pc firms do not provide training to their workforce, which can lead to operational accidents and inefficiencies in the processes, putting a dent in profitability, expansion and growth.

The proportion of permanent and temporary employees varied among firms, with ratios ranging from 20-80 to 80-20.

Published in Dawn, September 4th, 2023