ISLAMABAD: The Power Division is reportedly working on three proposals to reduce the industrial electricity tariff to 9 cents per kWh by eliminating cross-subsidy — one of the key demands of export-oriented industries for years, Business Recorder has learnt from reliable sources. The National Electric Power Regulatory Authority (Nepra) determined the tariffs for distribution companies (Discos) for CY 2026 on January 7, 2026, fixing the national average tariff at Rs 33.38 per kWh, compared to Rs 34.00 per kWh for FY 2025-26. For industrial consumers, the B-2 ToU rate has been fixed at Rs 34.47/kWh, B-3 ToU at Rs 33.26/kWh, and B-4 ToU at Rs 33.04/kWh. The government will notify revised tariffs after incorporating available subsidies in line with its agreement with the International Monetary Fund (IMF). Last month, the Power Division briefed the highest forum that industrial consumers are currently being charged a base variable rate of Rs 29.25 per unit against the Nepra-determined rate of Rs 23.88 per unit, effectively cross-subsidising domestic consumers by Rs 5.37 per unit. Eliminating this cross-subsidy would require an additional budgetary allocation of Rs 160 billion per annum — Rs 131 billion for Discos and Rs 29 billion for K-Electric. Explaining the rationale, sources said the move would make Pakistani industry regionally competitive and encourage higher production and exports. More affordable and predictable electricity tariffs would promote higher capacity utilisation, formalisation of industrial activity, and reinvestment in existing facilities. The reform is also expected to improve power sector efficiency by reducing reliance on captive generation, strengthening grid demand, and promoting a transparent and equitable tariff structure — thereby supporting sustainable economic growth and job creation. Based on data from the past 50 years, the price elasticity of demand is estimated at 0.22 percent, meaning a Rs 1 per unit reduction in tariff results in additional consumption of 265 GWh. Accordingly, a Rs 5.37 per unit reduction is expected to increase industrial electricity consumption by at least 1,423 GWh. This incremental demand is projected to raise real GDP by Rs 360 billion and generate additional tax revenue of Rs 28.5 billion. The overall fiscal impact of this proposal would be Rs 160 billion per annum in terms of revenue foregone and required subsidies. Sources further noted that the power sector budget has been reduced from Rs 1,287 billion in FY 2024-25 to Rs 893 billion in FY 2025-26 due to efficiency gains, and these savings should be utilised to enhance affordability and sustainability in the power sector. Proposal 2 After removal of cross-subsidy, the all-inclusive pre-tax industrial tariff would be Rs 31.34 per unit — comprising Rs 23.88 per unit variable charge, Rs 4.23 per unit fixed charge, and Rs 3.23 per unit DSS—equivalent to around 11 cents per kWh (at an exchange rate of Rs 280). A further reduction of Rs 6.13 per unit would bring the final tariff down to 9 cents per kWh. This would require an additional budgetary support of Rs 182 billion per annum —Rs 150 billion for Discos and Rs 32 billion for K-Electric — through fiscalisation of power producers’ debt, with the resulting generation cost relief ring-fenced for industrial consumers. If approved, this proposal would restore industrial competitiveness, boost production and exports, and drive economic growth. Sources said reducing the final industrial tariff to 9 cents would significantly enhance the global competitiveness of Pakistan’s export-oriented and energy-intensive sectors, encourage reinvestment and expansion, and reduce dependence on captive power generation. Fiscalising legacy power sector debt would separate past inefficiencies from current consumption decisions and strengthen confidence in the policy framework. A Rs 6.13 per unit tariff reduction is expected to increase industrial consumption by at least 1,624 GWh, raise real GDP by Rs 411 billion, and generate additional tax revenue of Rs 32.5 billion, with a fiscal impact of Rs 182 billion per annum. If the first two proposals are approved, the industrial tariff would be fixed at Rs 25.21 per kWh (9 cents), requiring a total subsidy of Rs 342 billion. However, electricity consumption would increase by 3,047 GWh, real GDP would rise by Rs 771 billion, and additional tax revenue of Rs 61 billion would be generated. Proposal 3 The third proposal relates to the inclusion of greenfield industries in the Grid Sustainability Package (GSP) 2025. The government has announced the GSP as a subsidy-neutral mechanism to unlock latent demand by offering electricity at the marginal cost of 8 cents per kWh for consumption above a defined baseline. While the IMF approved the GSP, it did not allow the discounted rate to apply to the entire consumption of greenfield industries. The Power Division has requested that discussions with the IMF be reopened to include greenfield industries in full, in order to ensure grid sustainability, enhance industrial competitiveness, and stimulate economic growth. The Power Division believes that since the current tariff structure already ensures full recovery of fixed costs through base consumption, extending the GSP rate to the entire load of greenfield data centres, crypto-mining facilities, and copper and aluminium industries would not compromise cost recovery. IMF-approved safeguards — including a 25 percent cap on aggregate incremental consumption, semi-annual reviews, and a termination clause—further mitigate fiscal and system-level risks. Sources said these greenfield industries, particularly data centres and crypto-mining operations, have significant potential to absorb surplus power, improve system load factors, stabilise grid operations during low-demand periods, and strengthen the financial sustainability of the power sector. Quantitative analysis using macroeconomic indicators shows that each additional 1 GWh of electricity sales adds Rs 253 million to real GDP. Although aluminium smelting and copper refining are energy-intensive, they generate tradable output and strong local supply chains involving mining, logistics, and exports. While the economic productivity per unit of electricity is lower for data centres and crypto-mining, these sectors still contribute meaningfully to GDP growth and tax revenues. If approved, this proposal would have a fiscal impact of Rs 182 billion per annum in terms of revenue foregone and required subsidies. Copyright Business Recorder, 2026