KEY POINTS
- Industrial cross-subsidy burden reduced from Rs 225 billion to Rs 102 billion
- Industrial electricity tariffs fall from Rs 62.99 to Rs 46.31 per unit
- National average electricity tariff declines from Rs 53.04 to Rs 42.27 per unit
- Govt introduces surplus power package at Rs 22.98 per unit for industrial and agricultural consumers
- Circular debt settlement plan aims to further reduce electricity costs
ISLAMABAD: Pakistan’s federal government has reduced the industrial power cross-subsidy burden by Rs 123 billion since March 2024, providing significant relief to manufacturers and supporting economic competitiveness.
The burden has fallen from Rs 225 billion (Rs 8.9 per unit) to Rs 102 billion (Rs 4.02 per unit), reflecting a targeted effort to lower industrial electricity costs.
According to data released by the Ministry of Power, these measures have contributed to a substantial drop in industrial electricity tariffs.
The average tariff, including taxes, decreased from Rs 62.99 per unit in March 2024 to Rs 46.31 per unit by December 2025. During the same period, the national average electricity tariff also declined from Rs 53.04 per unit to Rs 42.27 per unit, reflecting broader system-wide tariff rationalisation.
The reduction in tariffs has been achieved through structural reforms in the power sector. Inefficient power plants were retired, and contracts with Independent Power Producers (IPPs) were renegotiated, leading to lower generation costs. Additional negotiations with remaining power producers are ongoing to secure further tariff relief.
To provide further support to productive sectors, the government launched a surplus power package, allowing industrial and agricultural consumers to access additional electricity at Rs 22.98 per unit for 3 years.
This initiative has directly lowered the average industrial tariff and encouraged economic activity in energy-intensive sectors.
The government is also implementing a Circular Debt settlement plan designed to eliminate outstanding liabilities within five to six years. Once completed, the current debt surcharge of Rs3.23 per unit will be removed, further reducing electricity costs for industrial and commercial users.
Officials noted that the growing adoption of off-grid solar consumption has increased the number of protected consumers from 11 million in 2021 to approximately 22 million, putting pressure on fiscal resources and raising the cross-subsidy burden on industrial and commercial consumers. Currently, the cross-subsidy paid by commercial, bulk, and high-consuming domestic consumers exceeds that borne by the industrial sector.
Authorities stated that electricity tariffs reflect broader socio-economic policy objectives beyond cost recovery. They are exploring additional measures to further reduce the cross-subsidy burden, including subsidy reforms, debt refinancing, and additional tariff adjustments.
The reduction in industrial power costs is expected to enhance the competitiveness of Pakistan’s manufacturing sector and support broader economic growth, while signalling the government’s commitment to energy sector reforms and fiscal sustainability.
