ISLAMABAD:
Prime Minister Shehbaz Sharif on Thursday announced a new electricity tariff plan for industrial and agricultural consumers, fixing the rate at Rs23 per unit under a subsidy-neutral, cost-plus method. However, the benefit will only apply to 25% more consumption compared to the previous year.
According to officials negotiating 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 effect for three years without any rollover option.
The reduced tariff will expire if combined industrial and agricultural demand fails to rise above the baseline of 42.9 billion units or exceeds 53.7 billion units, capped at a 25% increase in consumption during the first year.
Announcing the package during a meeting with industry, agriculture and business representatives, the Prime Minister said the electricity price for industrial consumers has been reduced from Rs34 to Rs22.98 per unit, a reduction of Rs11 per unit or 32.4%.
Similarly, the price for agricultural consumers has been cut from Rs38 to Rs22.98 per unit, marking a Rs15 or 39.5% reduction.
Union Minister for Power Sardar Awais Leghari while talking to The Express Pakinomist explained that the 25% incremental use would be calculated
based on the collective consumption of all users, not individually. This, he said, allows flexibility for individual consumers as long as aggregate demand remains within the 25% limit set for both sectors.
Pakistan’s demand for electricity from the national grid fell by 9% to 96.2 billion units in the last financial year due to higher prices forcing consumers off the national grid. The worsening trend continued this fiscal year as well, with demand falling further to just 10.5 billion units in July – a 6% reduction from last year’s lower base.
To increase the demand, the government has come up with the electricity package where it does not provide any subsidy but still charges about Rs 5 per unit more than the cost of energy, according to government sources. The reduction in price is done by excluding the capacity payment charges from the bill, which will still apply to consumption below the baseline and above the 25% threshold consumption.
“From November 2025 to October 2028, additional electricity will be supplied to both the industrial and agricultural sectors throughout the year at the rate of Rs 22.98 per unit,” the Prime Minister said. He added that the burden of the electricity supplied under the package will not fall on private consumers or any other sector.
According to the work of the Power Division, which became the basis for setting prices and maximum thresholds, the base consumption of industrial and agricultural consumers is 42.9 billion units for the year 2026, and the relief will be available on the maximum 10.7 billion additional consumption for the whole year.
For the year 2027, the base demand is calculated at 44 billion units, and the reduced rates will apply to additional consumption of 11 billion units. For the year 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 essential for the growth of the national economy and the creation of employment opportunities,” the prime minister said. “We are taking all possible steps to improve the competitiveness of Pakistan’s industries and agriculture sector in the region and to facilitate ease of doing business,” said Shehbaz Sharif.
The power minister said that in case of new consumers who have no history of consumption, the incremental tariff rate will be applicable for half of the sanctioned load and the remaining half will be charged at Rs34 per load.
The government has estimated that the cost plus price could safely add 600 megawatts to 1,000 megawatts of consumption back into the national grid. This will help reduce blackout risks through better network utilization and stabilize tariffs through improved coverage of fixed costs.
The government expects the PM package to increase industrial growth by 0.5% annually and could add Rs21 billion more to the exchequer in the form of higher tax collection on increased consumption.
IMF limits
The sources said the Power Division had shared the package with the IMF for approval, which has set conditions for the continuation and the basis for termination.
Pakistan has been told that it would not set different electricity rates for specific industries and all the industries would pay a uniform tariff.
The normal Rs34 per unit rate will apply if consumption growth is below the incremental threshold and also if it crosses 25% above base consumption.
The scheme is to end within three years and the government will not ask for a transfer, the sources said. However, if the tariff price increases above the announced rate of Rs 23 per unit during the two consecutive half-yearly reviews, the rates will be revised accordingly, the sources said.
The Energy Minister told The Express Pakinomist that the government would conduct half-yearly reviews of the Prime Minister’s scheme to ensure that costs remain within the estimated 25% threshold.
The sources said the IMF has informed Pakistan that any loss due to the fact that revenue does not keep pace with tariff rates will automatically result in higher tariffs on industry and agriculture.
In addition, the industrial and agricultural sectors will not be eligible for relief under negative fuel price adjustment on the incremental consumption, but they will still be subject to higher fuel costs on the additional consumption.
Solar factor
The government has announced a reduction in electricity rates of up to Rs 7.6 per unit for industrial and agricultural consumers for gradual use in an effort to utilize 7,000 MW of excess power and stop the switch of consumers to solar energy.
The government will take the electricity utilization in the year 2024 as a reference, and discounts will be given on further use of electricity.
It has announced three packages for 25 percent extra electricity consumption, 50 percent and then 100 percent.
In Pakistan, almost over 90 percent of consumers have been switched to solarization. The Power Division has fought twice to change the solar net metering policy to stop consumers switching to solar.
The country is also facing problems with the utilization of the LNG sector as the power sector is not ready to carry the committed amount of LNG.
Even the government had approved a plan to provide relief by cutting the LNG withdrawal guarantees from 60 to 50 percent. The oil minister had protested over this and called glut of gas due to this decision.
Due to the abundance of gas, the government has approached Qatar to divert LNG cargoes due to low demand for LNG in the power sector. The recent package for additional use of electricity will also help to deal with the glut in the gas sector as the demand for LNG in the electricity sector will increase due to higher consumption of electricity.
Net solar metering and off-grid solarization in the agriculture and industrial sectors was also another reason leading to low electricity demand.
The power division had been fighting to change the solar net metering policy, but the prime minister had refused to approve the policy to avoid the political backlash and resentment of the masses.
Leghari said that more than 7,000 megawatts of surplus electricity is lying unused in our national power system.
As the full rate was found to be too expensive, we decided to make it affordable,” Leghari said, adding that the average electricity price for both sectors will come down.
Currently, consumers are paying capacity payments worth billions of rupees on electricity that is not being used. The additional consumption of 7000 MW of electricity will also reduce the capacity burden on the honest bill-paying consumers.
