ISLAMABAD: The country’s industrial sector on Monday strongly opposed a cross-subsidy of nearly Rs 130 billion imposed on industrial and export-oriented consumers, warning that the burden has rendered industrial growth and exports unfeasible.
Industry representatives expressed these concerns during a public hearing on the federal government’s motion for the determination of a uniform electricity tariff for the Current Year (CY) 2026, following recent tariff determinations by National Electric Power Regulatory Authority (Nepra), which proposed a reduction of 61 paisa per kWh for CY 2026.
The Nepra determined the tariffs of distribution companies (Discos) for CY 2026 on January 7, 2026, fixing the national average tariff at Rs 33.38 per kWh, compared to Rs 34.00 per kWh for FY 2025-26. These determinations were forwarded to the federal government for filing a uniform tariff application in accordance with the Nepra Act. Section 31(4) of the Act requires Nepra, on the basis of a uniform tariff application, to determine a uniform tariff for public-sector licencees engaged in power supply, in the consumer’s interest, based on consolidated accounts.
Subsequently, the Power Division filed a motion for determination of the uniform tariff based on the consolidated revenue requirement of Discos. In line with the National Electricity Policy, the uniform tariff will also apply to K-Electric (KE) consumers. Accordingly, the Nepra was requested to issue a revised Schedule of Tariff (SoT) for KE consumers, to be notified from January 1, 2026.
The hearing officiated by Chairman Nepra, Waseem Mukhtar (Zoom, Member (Development) Maqsood Anwar Khan (Zoom) and Member (Law) Amina Ahmed.
A Power Division team, led by Additional Secretary (Power Finance) Mehfooz Bhatti and Naveed Qaiser, gave a comprehensive presentation covering power-sector issues related to tariffs, revenue requirements, future generation forecasts, and the impact of solarisation, including net metering and off-grid solutions.
Industry representatives disclosed that recent consultations with the government revealed cross-subsidies of Rs 131 billion within Discos, while total cross-subsidies in KE’s jurisdiction amount to approximately Rs 160 billion. This means industrial consumers are effectively paying up to Rs 7 per kWh in cross-subsidy.
Referring to the textile spinning sector, participants highlighted that the number of spindles in Pakistan has fallen from 10.25 million to nearly half. In contrast, China has installed more than 3 million spindles in Xinjiang province — its poorest region — and is adding another 1.5 million spindles. The Chinese government provides electricity at around 5 cents per kWh, enabling rapid industrial expansion and job creation. Electricity tariffs in other parts of China range between 7 to 8 cents per kWh.
In comparison, Pakistan’s industrial electricity tariff stands at 12.9 cents per kWh, making exports uncompetitive. Chinese textile products, including yarn and fabric, are already flooding Pakistani markets.
“If the industry is relieved of cross-subsidy, the tariff would be around 9 cents per kWh, which could make exports viable. However, this option is being denied solely due to cross-subsidy,” a representative said.
Industry leaders noted that domestic consumers have reduced their monthly electricity consumption to below 200 units to remain eligible for subsidies by installing small solar plants.
Aamir Sheikh stated that neither industry nor exports can survive under current tariffs, adding that the cross-subsidy mechanism must be eliminated entirely. “The solution to Pakistan’s economic problems lies in industrial job creation, not in forcing industry to subsidise the domestic sector,” he said.
Industry representatives also pointed out that industrial consumers pay an additional Rs 3.23 per unit as Debt Servicing Surcharge (DSS) — another form of cross-subsidy — despite having no role in the creation of circular debt. They noted that 10,000 people enter the job market daily, requiring the same number of new jobs to prevent social instability.
“Industry pays around Rs 35 per kWh against an actual cost of Rs 29 per kWh, with full bill recovery and negligible line losses. The entire DSS is effectively a cross-subsidy,” Aamir Sheikh maintained.
Arif Bilwani urged the government and Nepra to abolish peak and off-peak tariff structures to ensure industrial survival.
All Pakistan Textile Mills Association (APTMA) emphasised that removing the cross-subsidy burden from B3 and B4 consumers would generate economy-wide benefits. Aligning tariffs for large-scale manufacturing with regional benchmarks of around 9 cents per kWh would restore competitiveness, boost exports, attract investment, and create jobs. Increased electricity demand would also improve capacity utilisation, reduce per unit costs, and lower tariffs across all consumer categories.
Rehan Javed proposed several recommendations: (i) transparent disclosure of cross-subsidies embedded in industrial tariffs; (ii) a time-bound plan for eliminating industrial cross-subsidies; (iii) provision of any remaining support through explicit, targeted budget subsidies instead of embedded tariffs; and (iv) ensuring that industrial off-peak consumption is not treated as the primary subsidy pool.
He also urged Nepra to apply voltage-wise allowed loss factors, differentiate distribution margins by voltage, and notify a defined high-voltage cost-of-service adjustment for B-category consumers.
Responding to industry concerns, Naveed Qaiser said the government remains in continuous consultation with stakeholders to reduce industrial tariffs. He noted that industrial cross-subsidies have been reduced from Rs225 billion to Rs102 billion, equivalent to a reduction of Rs5.13 per kWh. Overall industrial tariffs have fallen from Rs 62.33 per kWh in March 2024 to Rs 46.31 per kWh, a reduction of Rs 16.68 per kWh (26 percent).
The Power Division informed the Authority that Pakistan’s current installed power generation capacity stands at 58,013 MW, including 9,590 MW from government-owned power plants, 2,007 MW from hydel IPPs, 11,547 MW from thermal IPPs, and 2,795 MW from renewable IPPs. Power available on the National Grid Company system is 36,397 MW, while KE’s generation capacity is 2,647 MW. Net metering contributes 6,340 MW, and off-grid solar stands at 12,629 MW.
Under the new Indicative Generation Capacity Expansion Plan (IGCEP), installed capacity is projected to reach 87,209 MW by 2035, with 90 per cent clean energy, 10 per cent fossil fuel, 96 per cent local resources, and 4 per cent imported fuel.
Pakistan’s power import bill, which rose from USD 1.9 billion in 2018 to USD 2.4 billion, is projected to decline to USD 0.3 billion by 2035.
On solarisation, the Power Division reported that electricity sales declined from 113 billion units in 2023 and are expected to fall to 101 billion units by 2026, largely due to increased solar adoption. This has created a financial burden of approximately Rs 3.5 per kWh on Disco consumers who continue to pay electricity bills.
For FY 2026, 116.40 billion units were received, while 113.58 billion units are expected in CY 2026. Electricity sales stood at 103.56 billion units in FY 2026 and are projected at 101.23 billion units in CY 2026. Transmission and distribution losses are expected to decline from 11.04 per cent to 10.87 per cent.
Energy charges are projected to decrease by Rs 1.74 per kWh, capacity charges to increase by Rs 0.50 per kWh, Use of System Charges by Rs 0.51 per kWh, and distribution margins by Rs 0.26 per kWh. Prior year adjustments will rise by Rs 0.14 per kWh, while revenue requirements will decline by Rs 0.33 per kWh and working capital by Rs 0.29 per kWh. Overall, the Net Revenue Requirement is expected to fall by Rs0.61 per kWh during CY 2026.
Naveed Qaiser further stated that power sector circular debt which stood at Rs 1.6 trillion on June 30, 2025 will remain the same as seasonal variation of Rs 79 billion will be offset.
Copyright media, 2026
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