ISLAMABAD:
Prime Minister Shehbaz Sharif on Thursday announced a new electricity pricing scheme for industrial and agricultural consumers, fixing the tariff at Rs 23 per unit under a cost-plus and neutral subsidy method. The benefit, however, will only apply to additional consumption of 25% compared to the previous year.
According to officials who negotiated with the International Monetary Fund (IMF), the lender has imposed strict conditions on both the use and duration of the package. The ‘Roshan Maeeshat Electricity Package’ will remain in force for three years without any extension option.
The reduced tariff will expire if combined industrial and agricultural demand does not exceed the base of 42.9 billion units or exceeds 53.7 billion units, the limit set for a 25% increase in consumption during the first year.
Announcing the package during a meeting with industrial, agricultural and business representatives, the chief minister said the electricity tariff for industrial consumers has been reduced from Rs 34 to Rs 22.98 per unit, a cut of Rs 11 per unit or 32.4%.
Similarly, for agricultural consumers, the price has been reduced from Rs 38 to Rs 22.98 per unit, which is a reduction of Rs 15 or 39.5%.
Federal Energy Minister Sardar Awais Leghari explained in an interview with The Express PAkGazette that the 25% increase would be calculated
based on the collective consumption of all users, not individually. This, he said, allows flexibility for individual consumers as long as total demand remains within the 25% limit set for both sectors.
Pakistan’s electricity demand from the national grid plunged 9% to 96.2 billion units in the last fiscal year as higher prices forced consumers to bypass the national grid. The worsening trend continued in this fiscal year as well and demand fell further to just 10.5 billion units in July, a 6% reduction from last year’s lower base.
To boost demand, the government has introduced the electricity package, in which it does not give any subsidy but continues to charge about Rs 5 per unit more than the cost of power, according to government sources. The price reduction is made by excluding capacity payment charges from the invoice, which will continue to be applicable for consumption below the base threshold and above 25%.
“From November 2025 to October 2028, additional electricity will be provided to the industrial and agricultural sectors throughout the year at the rate of Rs 22.98 per unit,” the chief minister said. He added that the burden of electricity supplied under the package will not fall on domestic consumers or any other sector.
According to the operation of the Energy Division, which became the basis for fixing prices and maximum thresholds, the base consumption for industrial and agricultural consumers is 42.9 billion units by 2026 and relief will be available on the maximum of 10.7 billion additional consumption for the entire year.
By 2027, base demand is estimated at 44 billion units and the reduced rates will apply to an additional consumption of 11 billion units. By 2028, base demand is estimated at 45.4 billion units and relief will be available at 11.4 billion units.
“The development of industry and agriculture is vital for the growth of the national economy and the creation of employment opportunities,” the prime minister said. “We are taking all possible measures to improve the competitiveness of Pakistan’s industries and agricultural sector within the region and improve the ease of doing business,” Shehbaz Sharif said.
The Power Minister said that in case of new consumers who have no consumption history, the incremental tariff will be applied to half of the sanctioned load and the remaining half will be charged at Rs 34 per unit.
The government has estimated that cost plus price can safely add between 600 megawatts and 1,000 megawatts of consumption to the national grid. This will help reduce the risks of blackouts through better network utilization and stabilize rates through better recovery of fixed costs.
The government hopes that the PM package can increase industrial growth by 0.5% annually and can add Rs 21 billion more to the national exchequer in the form of higher tax collection on increased consumption.
IMF limits
Sources said the Energy Division had shared the package with the IMF for approval, which has set the conditions for its continuation and the basis for its termination.
Pakistan has been told that it will not set different electricity tariffs for specific industries and that all industries will pay a uniform tariff.
The normal tariff of Rs 34 per unit will be applicable in case the consumption growth is below the incremental threshold and also if it exceeds 25% of the reference consumption.
The plan has to be finalized within three years and the government will not ask for an extension, sources said. However, if the tariff price increases above the announced rate of Rs 23 per unit during the two consecutive semi-annual reviews, the tariffs will be revised accordingly, sources said.
The Energy Minister told The Express PAkGazette that the government would carry out semi-annual reviews of the Prime Minister’s plan to ensure the cost remains within the estimated 25% threshold.
Sources said the IMF has informed Pakistan that any loss due to revenue not keeping up with tariffs would automatically result in higher tariffs for industry and agriculture.
Additionally, the industrial and agricultural sectors will not be eligible for relief under the negative fuel price adjustment for incremental use, but will still be subject to paying higher fuel costs for additional consumption.
solar factor
The government has announced a reduction in electricity tariffs of up to Rs 7.6 per unit for industrial and agricultural consumers for incremental usage in a bid to utilize 7,000 MW of surplus power and arrest the shift of consumers to solar energy.
The government will take electricity consumption in 2024 as a reference and discounts will be given for additional electricity use.
It has announced three packages for additional electricity usage of 25 percent, 50 percent and then 100 percent.
In Pakistan, almost more than 90 percent of consumers have opted for solarization. The Energy Division has twice fought to modify the solar net metering policy to stop consumers switching to solar energy.
The country also faces problems in the utilization of the LNG sector, since the electricity sector is not prepared to transport the committed volume of LNG.
The government had even approved a plan to provide relief by cutting LNG extraction guarantees from 60 to 50 percent. The Minister of Petroleum protested this and described the excess gas as a consequence of this decision.
Due to the glut of gas, the government has approached Qatar to divert LNG cargoes due to low demand for LNG in the energy sector. The recent package for additional electricity usage will also help manage the glut in the gas sector as demand for LNG in the power sector will increase due to increased electricity consumption.
Solar net metering and off-grid solarization in the agricultural and industrial sectors were also other reasons leading to low electricity demand.
The power division had struggled to amend the solar net metering policy, but the prime minister had refused to approve it to avoid political backlash and mass resentment.
Leghari said more than 7,000 megawatts of surplus electricity are unused in our national electricity system.
“When the full tariff turned out to be too expensive, we decided to make it affordable,” Leghari said, adding that the average cost of electricity in both sectors will come down.
Currently, consumers pay capacity payments worth billions of rupees for unused electricity. The additional consumption of 7,000 MW of electricity will also reduce the capacity burden on honest consumers who pay the bills.
