ISLAMABAD: The government has shared a new electricity pricing proposal with the International Monetary Fund that would significantly increase fixed charges for industrial consumers using less than their sanctioned electricity load, particularly those shifting to solar power and other off-grid energy sources.
Officially titled the two-part industrial tariff policy, the proposal aims to recover fixed power sector costs and capacity payments as industrial demand from the national grid continues to decline amid high electricity prices and weak economic growth.
Under the proposed structure, industrial consumers that draw more electricity from the grid would benefit from lower per-unit energy rates, while those with lower grid consumption would face higher fixed charges.
A spokesman for the Power Division confirmed that the policy is currently under consultation and could be implemented within the next two months.
According to a report by Express Tribune, Power Minister Sardar Awais Laghari recently briefed the IMF on the proposal. The plan is based on the assumption that raising fixed charges while lowering energy rates can encourage industries to remain connected to the national grid and increase electricity consumption.
Initially, the new tariff framework would apply only to industrial consumers, though officials say there is consideration to extend it to commercial and residential users at a later stage.
Shift away from the grid
The proposal comes as the government struggles to arrest a growing shift away from the national grid. High power tariffs have pushed many industrial and commercial users toward solar installations and gas-based captive generation, reducing demand for grid electricity.
Officials believe the new pricing mechanism could spread fixed power sector costs over higher electricity sales volumes, ultimately reducing per-unit prices. Preliminary assessments suggest the policy could generate around 1,000 megawatts of additional demand within six to twelve months of implementation, depending on market response.
At present, energy charges form the larger portion of electricity bills, although fixed charges have risen steadily in recent years. The Power Division argues that the current tariff structure provides little incentive for industries to increase grid consumption.
In one example cited during internal discussions, an industrial consumer in Karachi received a bill of Rs8,158 for consuming just four units of electricity, translating into an effective cost of Rs2,040 per unit due to a fixed charge of Rs6,750. Under the proposed framework, such fixed charges could rise further for low-usage consumers.
IMF concerns and sector risks
The IMF has raised concerns over the rapid decline in industrial electricity demand during recent budget discussions. Officials fear that if more high-paying consumers exit the grid, the already strained power sector could face a deeper financial crisis, leaving distribution companies with fewer viable customers.
The IMF has asked the government to regularly share data on industrial consumption trends and the number of consumers disconnecting from the grid before giving final approval to the plan.
Speaking on a television programme hosted by Mohammad Malick, the power minister said fixed costs account for nearly 75 percent of power generation expenses, while only 25 percent relates to actual electricity production. He said fixed costs decline when consumption is high but rise sharply when demand falls.
How the new tariff would work
A Power Division spokesman said the new tariff would be optional, not mandatory, and is intended to improve utilisation of existing generation and transmission infrastructure while supporting industrial growth.
He explained that many industrial users maintain high sanctioned loads but consume relatively little electricity. Despite low usage, the power sector must still maintain full generation and network capacity, creating unavoidable fixed costs.
Under the proposed model, industries using more than 50 percent of their sanctioned load could see energy tariffs reduced by one to two US cents per kilowatt-hour, bringing effective rates down to around 7 to 8 US cents per kWh. At higher utilisation levels, tariffs could fall further to nearly 6 US cents per kWh, potentially improving Pakistan’s competitiveness for energy-intensive industries.
Officials say aligning tariffs more closely with the sector’s cost structure could benefit both the government and high-utilisation industrial consumers. The policy is still being finalised and will require approval from regulators and other authorities before implementation.
If approved, continuous-process industries and other energy-intensive sectors are expected to be among the first adopters. Officials also believe the new pricing mechanism could influence future investment decisions related to captive generation and solar power, particularly if grid electricity becomes cost-competitive during daytime hours.
