Islamabad:
Friday, the government presented a new package in front of foreign donors up to 10.5 rupees per unit price reduction on additional electricity use by consumers in the industrial and agricultural sector to increase demand, which had dropped a fifth due to unaffordable prices.
The Minister of Power, Sardar Awais Laghari, shared the wider contours of the industrial support package (2026-28) with more than a dozen representatives of international development organizations to request their diplomatic support to reduce prices.
The whole seemed to gain ground with lenders, but their observations were focused on the sustainability of the increase in demand and the viability of the national electricity of the network. They have raised concerns about understanding only price signals in order to stimulate the drop in electricity demand instead of implementing complete reforms in the energy sector, in particular by guaranteeing the reliability of the national network.
The response of the Minister of Power was expected until the deposit of this story is deposited.
The government’s representatives said that the Division of Power had informed foreign donors that he wanted to introduce a support package for a period of three years (2026-28) and counted on their support. Among the participants were the World Bank, the Asian Development Bank (BAD) and other regional and international development organizations.
According to the proposal, the government wishes to reduce the current average electricity price of RS33.5 per unit RS10.5, but only on the additional use of electricity. He proposed that industrial connection rates be set at RS22.98 per unit. For the agricultural sector, the rate will be the same, but the advantages will be 7.77 Rs per unit due to RS30.75 Rs current per unit price.
Foreign diplomats have been informed that price reduction would only apply to additional electricity consumption compared to consumption from December 2023 to November 2024. In cases where no reference consumption is available, higher consumption of the relevant month or the sanctioned load will be used for comparison.
The government said the new package would be a subsidy and a neutral cost, and should neutralize any opposition from the International Monetary Fund (IMF) this time. The IMF had rejected a similar package last year because of its implications for other consumers.
According to the proposal, the service overload of 3.23 RS3.23 per unit of debt and the adjustment of quarterly prices will not apply to the industrial support package. However, this exclusion could harm residential consumers, whose debt descent supplement can increase more to collect enough funds to withdraw the debt by 1, Billion de Rs acquired from banks to respond to the circular debt.
A government official noted a discrimination element, because a large number of consumers in the Sindh could increase to the national network due to the high gas prices, which makes them eligible for additional advantages compared to the Punjab -based industries which are already strongly dependent on the national network.
Due to inaction, industrial consumers are moving away more and more from the national electricity network. The demand for industrial electricity has dropped by 20% in the past two years. Consequently, the number of industrial consumers with net heads increased to almost 6,900 during the year 2024, against only 1,570 in 2022. Electricity prices for industrial consumers in Pakistan are among the highest in the region. Compared to around 16 hundred US per unit locally, electricity costs 9 hundred US in India and 10 Cents US in Bangladesh, the two largest competitors in Pakistan in the world markets.
However, concerns remain concerning the sustainability of the package and if such price reductions can be beneficial without solving the underlying problems of the electricity sector. Foreign diplomats have been informed of the reforms that the government undertakes. A participant told L’Express PK Press Club that after investigation, it seemed that all these initiatives were delayed from prolonged deadlines. The competitive market is not yet operational and the government has told participants that it could become operational in September. Disputes concerning wheel costs persist, and the revised integrated production capacity plan is also faced with delays. The privatization of electricity distribution companies has not been accelerated and the government does not want to end the uniform electricity prices policy, which penalizes consumers based in Punjab for theft in other provinces.
A major lender has inquired about the claim of the excess production capacity, wondering if the system can generate a power equal to the installed capacity and if the transmission system can manage the full load.
Sources have said that concerns were also concerning the viability of increased demand once the package is finished. Evidence from similar industrial support packages in the past have shown that demand peaks were generally modest and have not resulted in a sustained dependence on the grid.
Sources have added that potential risks exist that the real costs of this package could exceed the proposed marginal rate, especially during the summer season.
One of the main opinions was that any effort to restore industrial demand thanks to a support package should be made in a wider framework which balances both the price and the elements not price. The risks of implementation, the reliability of the network and the quality of the services are critical dead angles which could limit the success of the package.
Donators advised the government to restore industrial demand on the network thanks to a combination of provision of reliable services and planning at the sector, rather than counting reactive short -term measures.
