Pakistan’s Power Division has announced a significant reduction in the industrial cross-subsidy burden, marking a notable shift in the country’s electricity pricing landscape. According to official figures, the cross-subsidy imposed on industry has fallen from Rs225 billion (Rs8.9 per unit) in March 2024—when the current government assumed office—to Rs102 billion (Rs4.02 per unit) today. This Rs123 billion reduction is being positioned as a major step toward restoring industrial competitiveness.

The impact is already visible in tariffs. The industrial electricity tariff, inclusive of taxes, declined sharply from Rs62.99 per unit in March 2024 to Rs46.31 per unit by December 2025. Similarly, the national average tariff fell from Rs53.04 to Rs42.27 per unit. These reductions, the Power Division says, were made possible through tough decisions such as terminating inefficient power plants and renegotiating contracts with independent power producers (IPPs). Further negotiations with remaining IPPs are still underway, suggesting more potential relief ahead.

Another important measure has been the introduction of a surplus power package, allowing industrial and agricultural consumers to use additional electricity at a concessional rate of Rs22.98 per unit for three years. This initiative has helped pull down average industrial tariffs and encouraged higher utilization of excess generation capacity.

However, structural challenges persist. The Power Division has pointed to the growing impact of off-grid solar adoption, which has doubled the number of protected consumers from 11 million in 2021 to 22 million today. Hybrid consumption patterns, it argues, have distorted subsidy calculations, placing a disproportionate cross-subsidy burden on industrial and commercial users and undermining their competitiveness.

Looking ahead, the government is also pursuing a circular debt settlement plan aimed at clearing outstanding liabilities within five to six years. Once achieved, the removal of the Rs3.23 per unit debt surcharge could further ease tariffs. While electricity pricing remains tied to broader socio-economic policy, ongoing subsidy reforms and debt refinancing efforts indicate a continued push to rebalance the system in favor of productive sectors.

 Credit: Independent News Pakistan (INP)