Pakistan has implemented a multi-tier industrial electricity tariff structure with incremental consumption priced at Rs 22.98 per unit through October 2028, while base industrial tariffs stand at Rs 46.31 per unit after a 26% reduction.
The three-year relief package aims to boost industrial competitiveness and reverse a 14% decline in industrial electricity demand, though industry leaders warn that fuel adjustments are neutralizing much of the promised savings.
Over 127,000 industrial consumers have benefited from Rs 12.1 billion in relief during December 2025 and January 2026.
Current Industrial Tariff Structure
NEPRA’s tariff determination for calendar year 2026 set the national average electricity tariff at Rs 33.38 per kWh, a slight reduction from Rs 34.00 per kWh in FY 2025-26.
Pakistan’s industrial electricity pricing operates through a dual-rate system combining base tariffs with incremental consumption incentives designed to utilize surplus generation capacity.
Base Tariff Rates
Industrial electricity tariffs have been reduced by 26%, bringing the rate down from Rs 62.99 per unit to Rs 46.31 per unit.
The base industrial rate applies to consumption at or below historical baseline levels established from consumption patterns in fiscal year 2024. Industrial consumers pay this standard rate plus applicable fuel cost adjustments, quarterly tariff adjustments, and debt service surcharges.
Industrial stakeholders criticized the existing billing methodology, which calculates fixed charges based on peak demand over the past five years, and called for a Rs 2 per unit discount for bulk consumers (B3 and B4 categories) who invest in their own infrastructure.
Incremental Consumption Package
A reduced electricity rate of Rs 22.98 per unit applies to incremental power consumption, a sharp cut from the prevailing base tariffs of around Rs34 per unit for industrial users and Rs 38 per unit for agricultural consumers.
From November 2025 till October 2028, additional electricity is provided to both the industrial and agricultural sectors throughout the year at a rate of Rs 22.98 per unit.
The incremental package targets consumption above baseline levels determined from December 2023 to November 2024. Certain surcharges, including Quarterly Tariff Adjustments and the Debt Service Surcharge, do not apply to incremental power usage.
The reduction in price is made by excluding capacity payment charges from the bill, which still remain applicable on below baseline and above 25% threshold consumption.
Read more: Roshan Maeeshat Electricity Package to boost industry, agriculture growth
Three-Year Tariff Reduction Plan
The base consumption for industrial and agriculture consumers is 42.9 billion units for 2026, with relief available on maximum 10.7 billion additional consumption for the full year. For 2027, base demand is calculated at 44 billion units with reduced rates applicable on additional consumption of 11 billion units. For 2028, base demand is estimated at 45.4 billion units with relief available at 11.4 billion units.
The incremental consumption package allows flexibility as the 25% incremental use is calculated based on collective consumption of all users, not individually, allowing flexibility for individual consumers as long as total demand stays within the 25% limit set for both sectors.
For new consumers having no history of consumption, the incremental tariff rate is applicable on half of the sanctioned load and the rest of the half is charged at Rs 34 per unit.
The IMF approved the package with conditions: Pakistan cannot set different rates for specific industries and all industries must pay one uniform rate.
Cross-Subsidy Burden on Industry
Industrial tariffs currently carry a cross-subsidy burden of Rs 131 billion, rising to Rs 160 billion when K-Electric is included. This adds around Rs 6.5 per kWh to B3 industrial tariffs, pushing the effective power cost for Pakistani industry to nearly 12.5 US cents per kWh.
There is a significant cross-subsidy from industrial and commercial consumers to agricultural and domestic consumers. High cost of electricity has reduced the competitiveness of exports, thereby impacting the country’s trade deficit and balance of payment.
Unless the industrial cross-subsidy is removed, Pakistan’s exports will remain uncompetitive regardless of exchange rate movements or incentive packages. Eliminating this burden is the only way to bring industrial power tariffs down to around 9 cents per kWh, critical to sustaining exports.
Industry representatives voiced concerns over the nearly Rs 130 billion cross-subsidy burden imposed on industrial and export-oriented consumers, warning that this financial strain has made industrial growth and exports unfeasible, particularly as the textile sector struggles to compete with cheaper imports, notably from China.
Regional Competitiveness Gap
Competing export economies such as China, India, Bangladesh, and Vietnam offer electricity to industry at 5–9 cents per kWh, placing Pakistan at a severe structural disadvantage.
Despite some progress, the current electricity tariff of 10-11 cents per kWh remains higher than the regional benchmark of 9 cents per kWh. Competing economies offer electricity at rates between 5–9 cents per kWh, making Pakistan’s energy-intensive textile sector less competitive.
A 1 percent increase in electricity tariffs decreases textile exports by 0.5 percent and other manufactured exports by 0.4 percent.
Energy makes up around 35-40% of conversion cost in textile. Among all factors that make the textile sector of Pakistan regionally uncompetitive, energy tariff is at the core.
Pakistan’s industrial electricity cost disadvantage undermines export-led growth strategies and threatens de-industrialization as manufacturers shift to countries with cheaper energy.
Implementation and Relief Delivered
127,686 industrial consumers availed themselves of the scheme in December 2025 and January 2026, receiving a combined relief of Rs 12.125 billion.
1,176 million units of electricity were sold under the surplus package in the two-month period, accounting for nearly 24 per cent of total industrial consumption. December saw 557 million units sold under the scheme, providing Rs 5.743 billion in relief, while January recorded 619 million units and Rs6.382 billion in benefits.
The government estimates the cost-plus price can safely add 600 megawatts to 1,000 megawatts consumption back in the national grid. This will help reduce blackout risks through better grid utilization and stabilize tariffs via improved fixed cost recovery.
The government expects the PM package can increase industrial growth by 0.5% annually and can add Rs 21 billion more in the national exchequer in the form of higher tax collection on increased consumption.
The initiative aims to boost electricity consumption, which has fallen by 14% in the industrial sector and 47% in agriculture over the past three years.
Fuel Cost Adjustments Offset Gains
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) warned that the fuel cost adjustment (FCA) for January alone increased charges by Rs 1.78 per unit, with another Rs 0.40 per unit expected under quarterly revisions. FPCCI President stated that more than half of the promised relief had been neutralised within the same billing cycle.
Business leaders contend that rising fuel costs and quarterly adjustments have effectively wiped out much of the announced reduction.
The IMF informed Pakistan that any losses due to revenues not keeping up with tariffs would automatically result in higher tariffs on industry and agriculture. Moreover, the industrial and agriculture sectors are not entitled to relief under negative fuel price adjustment on the incremental usage but still must pay higher fuel cost on additional consumption.
Industry leaders criticized repeated tariff rebasing in July 2025 and January 2026, arguing that such volatility undermines planning certainty and export competitiveness.
Industry Concerns and Challenges
Industrial representatives dispute government claims, arguing that relief primarily benefited inactive or limited scale units, while larger B3 and B4 category industries, which contribute no losses to the grid but pay higher tariffs, saw little real advantage.
Excessive power tariffs are pushing industries to divert capital from productive expansion into expensive self-generation and alternative energy solutions. High tariffs are suppressing electricity demand, leading to under-utilisation of generation capacity and higher per-unit capacity payments.
The Time-of-Use (ToU) tariff regime’s blanket application to 24/7, three-shift industries is economically irrational. Such industries provide stable baseload demand and were never intended targets of ToU pricing. Industry urged adoption of a single weighted-average tariff for large industrial consumers.
The ToU structure, originally introduced to manage power shortages, is now outdated given the country’s surplus generation capacity. The continued use of ToU pricing is counterproductive as it contributes to high tariffs and underutilized generation capacity.
High tariffs create a vicious cycle of falling demand and rising tariffs, whereas removing cross-subsidies could initiate a virtuous cycle of higher consumption, improved capacity utilisation, and lower system-wide costs.
Export Impact and Economic Objectives
Prime Minister Shehbaz Sharif said that reducing electricity tariffs is a key step towards industrial growth and enhancing the global competitiveness of Pakistani products.
The development of industry and agriculture is vital for the growth of the national economy and the creation of employment opportunities. Pakistan is taking every possible step to enhance the competitiveness of industries and agricultural sector within the region.
A robust negative association exists between export growth and energy tariff increase. A 1 percent increase in electricity tariffs decreases textile exports by 0.5 percent and other manufactured exports by 0.4 percent.
Reduced electricity costs and lower financing rates will directly benefit energy-intensive sectors such as textiles, steel, and manufacturing. The measures are expected to enhance production capacity, reduce operational expenses, and improve Pakistan’s competitive edge in international markets.
Without immediate corrective measures—particularly removal of industrial cross-subsidies and rationalisation of the ToU regime—Pakistan risks rapid de-industrialisation, shrinking exports, and further deterioration of the power sector’s financial health.
The electricity pricing structure remains central to Pakistan’s economic competitiveness. While the government has introduced significant tariff reductions totaling over Rs15 per unit since mid-2024, the persistent cross-subsidy burden, fuel cost volatility, and regional cost disadvantage continue to undermine export competitiveness and industrial growth objectives.
Long-term solutions require structural reforms eliminating cross-subsidies, rationalizing the Time-of-Use tariff framework, and aligning Pakistani industrial electricity costs with the 9 cents per kWh regional benchmark necessary to compete in global markets.