Industrial power tariff slashed by Rs. 16.68 per unit in 21 months

ISLAMABAD: The industrial cross-subsidy burden has been reduced from Rs. 225 billion (Rs. 8.9 /unit) in March 2024, when the current Government took charge, to currently at Rs 102 billion (Rs. 4.02 per /unit), which represents a substantial reduction of Rs. 123 billion. Industrial tariff (including tax) declined from Rs. 62.99 (Mar-2024) to Rs. 46.31 (Dec-2025), while the national average tariff reduced from Rs. 53.04 to Rs. 42.27.

To reduce electricity tariffs, the government has terminated inefficient power plants and successfully renegotiated contracts with Power Producers (IPPs). These actions have resulted in tariff reductions, and further negotiations with the remaining Power Producers are in progress.

The government has also offered a surplus power package, allowing industrial and agricultural consumers to avail additional electricity at a reduced rate of PKR 22.98 per unit for three years, helping to reduce average industrial tariffs.

Additionally, the government has launched a Circular Debt settlement plan to eliminate outstanding debt within 5–6 years. Once cleared, the debt surcharge currently charged at Rs. 3.23 per unit will be removed, providing further tariff relief to consumers.

It is important to highlight that the off-grid solar consumers have distorted the subsidies requirement, doubling the protected consumers from 11 million in 2021 to 22 million recently, due to hybrid consumption strategies.

This not only strained the fiscal resources but also increased the burden via cross-subsidies to industrial and commercial users, eroding their competitiveness. The cross-subsidy paid by commercial, bulk, and higher-consuming domestic consumers is far above the level of cross-subsidy being paid by industry.

Although the tariffs reflect the Government’s broader socio-economic policy, not merely the recovery mechanism, the Government is exploring various other options to further reduce the cross-subsidy burden from industrial consumers, including subsidy reforms and debt refinancing, in addition to the above tariff reduction measures already in place.