ISLAMABAD: Pakistan’s Rs22.98 per unit electricity package for incremental industrial and agricultural consumption is facing renewed scrutiny as actual marginal costs climbed to Rs42.37 per unit after losses, leaving other consumers exposed to the widening cost gap.
The National Electric Power Regulatory Authority (NEPRA) held a public hearing on Monday on the Power Division’s request to reconsider the incremental consumption package applicable to industrial and private agricultural consumers of XW-DISCOs and K-Electric.
The package provides electricity at a fixed rate of Rs22.98 per kWh for incremental consumption and applies to both ToU and Non-ToU consumers during peak and off-peak periods.
However, the Power Division’s presentation showed that the cost of supplying the additional electricity had risen substantially above the package rate.
The weighted average marginal cost during December-May was Rs27.58/kWh. After accounting for transmission and distribution losses, the figure increased to Rs31.83/kWh.
The gap widened sharply during April and May. The average marginal cost reached Rs36.71/kWh in April and Rs33.98/kWh in May, while loss-adjusted costs rose to Rs42.37/kWh and Rs39.22/kWh, respectively.
As a result, the loss-adjusted marginal cost exceeded the package tariff by Rs19.39 per unit in April and Rs16.24 per unit in May.
The Power Division informed NEPRA that the difference between the fixed package rate and the higher marginal cost was being borne by other electricity consumers, subject to the regulator’s decision.
This effectively raises concerns about a growing cross-subsidy burden on consumers who are not benefiting from the package.
The package itself provides for a review if combined industrial and agricultural electricity consumption rises more than 25% above the baseline. Consumption growth crossed that threshold in January, February and April, reaching 25.13%, 26.20% and 34.81%, respectively.
The mechanism also requires semi-annual reviews to maintain alignment between costs and revenues. It allows marginal tariffs to be adjusted where required and provides for termination if an upward adjustment is needed in two consecutive reviews.
The Ministry of Energy (Power Division) was expected to provide the required information after stakeholder consultations in June. Raw data was eventually submitted to NEPRA on July 29.
Following NEPRA’s request for a proposal, the Power Division responded on September 9, asking the regulator to initiate proceedings.
The presentation placed the six-month weighted average marginal rate at around Rs32/kWh, while four months had already passed in the second review period.
The effective break-even prices were also significantly higher than the package rate, standing at Rs31.15/kWh for B1 peak consumers, Rs29.05/kWh for B2 ToU consumers, Rs30.03/kWh for B3, Rs29.62/kWh for B4 and Rs32.91/kWh for B5.
All of these break-even rates were above the existing Rs22.98/kWh package tariff.
Intervener Rehan Javed proposed that the tariff be revised to the actual marginal cost with effect from June 2026. He also sought a refund of the marginal-price difference recovered from non-beneficiary consumers since June.
Under his proposal, the amount would be recovered from package beneficiaries at the revised rate, with any remaining amount recovered from the government as sponsor of the scheme.
Intervener Amir Sheikh argued that the package was increasing the cross-subsidy burden on domestic and commercial consumers, while a smaller group of beneficiaries was receiving electricity below its effective cost.
He also questioned the need for the package after the gas levy prompted captive power consumers to shift to the national grid.
Sheikh further argued that simultaneously carrying out load-shedding while providing reduced-cost electricity to industrial and agricultural consumers was contradictory, and called for suspension of the package.
NEPRA will now consider whether the Rs22.98/kWh rate remains sustainable or whether it should be revised or the package suspended in line with its review and termination provisions.
