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Business Recorder
24-05-2025
- Business
- Business Recorder
Power in decline
EDITORIAL: Just as the government prepares to repackage power sector subsidies in a new structure discussed with the World Bank, its own projections for future electricity costs have triggered alarm across the industrial landscape. The textile sector, already battered by erratic supply and steep bills, is warning of a retreat back to captive generation – an outcome that exposes the widening gap between policy claims and operational reality. At the heart of the dispute lies the Power Division's submission to Nepra of power purchase price (PPP) projections for FY2025-26. Despite years of renegotiations with Independent Power Producers (IPPs) and claims of trillions saved, the projected tariffs for next year remain strikingly similar to the old ones. In scenario after scenario presented by the Central Power Purchasing Agency (CPPA-G), the cost of power hovers between Rs24.75 and Rs26.70 per unit. Not only do these projections fail to reflect any tangible benefit from reforms, they also disregard the lived experience of industrial users grappling with frequent supply disruptions and declining competitiveness. From Karachi to Lahore, the industrial sector is demanding clarity: where are the savings, and why are they not translating into reduced tariffs? The fact that power rates may actually rise by Rs5-6 per unit in July, as time-bound fuel and quarterly adjustments expire, only deepens the frustration. Already, grid power has become synonymous with unreliability, causing production losses of up to 10 percent compared to captive generation. If prices rise further, many manufacturers see little choice but to revert to their own plants – despite the inefficiencies – just to keep operations stable. Nepra's hearing last week laid bare the disconnect between official optimism and industrial reality. Industry representatives criticised the flawed assumptions underpinning the CPPA's scenarios: overestimated GDP growth, inflation pegged at 8.65 percent despite a clear downward trend, and Kibor set at 11.9 percent even as interest rates are expected to fall into single digits. They also pointed to the absence of any discernible impact from IPP renegotiations, especially with the expensive Jamshoro coal plant and other legacy capacity charges still weighing heavily on the system. Meanwhile, the new subsidy restructuring proposal is being sold as progressive and targeted—but details reveal more of the same. Instead of genuine cost rationalisation or structural reform, the plan reshuffles consumer categories and discounts under a new label, seeking to placate lenders rather than fix the sector's fundamentals. For large-scale industry, the implications are dire. A distorted pricing structure, unreformed distribution companies (Discos), and unreliable supply chains are combining to undermine export potential at a time when Pakistan can least afford it. The sharpest warning came from the textile sector, which signalled that if quality and pricing are not addressed, it will abandon the grid altogether. Such a shift would not just undo years of policy work but also widen the inefficiency loop: as more high-volume users exit the system, the cost burden will shift further onto a shrinking base, deepening the circular debt crisis and exposing the sector to yet more political patchwork. Nepra's call for more realistic planning and transparency is timely, but insufficient. The Power Division's defence that projections are based on assumptions from IFIs and government agencies only underscores how deeply these exercises have lost touch with economic reality. What industry is demanding is not perfect foresight, but coherence and accountability. That these remain elusive after decades of reform is telling. With consumption already falling and energy affordability now front and centre in export decisions, the warning signs are flashing red. Policymakers may have convinced external lenders of their good intentions, but they are rapidly losing the confidence of the very users who keep the system afloat. Unless corrected, these flawed assumptions and misplaced priorities will not just cripple industry – they will power Pakistan straight into stagnation. Copyright Business Recorder, 2025
Express Tribune
02-04-2025
- Business
- Express Tribune
PM likely to announce Rs8 per unit power tariff reduction on April 3
Listen to article Prime Minister Shehbaz Sharif is expected to announce a reduction in electricity prices during a high-level meeting on the power sector scheduled for tomorrow. According to Express News, the prime minister will chair the meeting, which will also be attended by key federal ministers. During the session, PM Shehbaz is expected to address the participants and announce the much-anticipated Rs 8 per unit reduction in electricity prices. The meeting is set to take place at 2:00 PM tomorrow. The tariff adjustment results from multiple measures, including the cancellation of agreements with six Independent Power Producers (IPPs), revising contracts with 16 IPPs under a "take-and-pay" model, shifting bagasse power plants' currency from the US dollar to Pakistani rupees, and lowering the return on equity (ROE) for government power plants (GPPs) to 13%, with the dollar rate fixed at Rs168. Officials noted that the tariff reduction calculations also account for the impact of lower oil prices in the global market since March 16, 2025. Maintaining current oil prices is expected to save approximately Rs168 billion, allowing a reduction of Rs1.30 per unit in power tariffs. The IMF has agreed to approve this relief, acknowledging the government's decision to freeze oil prices for three months. The government aims to make Rs6 per unit of the Rs8 reduction a permanent adjustment. Additionally, sources indicate that the Rs35 PTV fee included in electricity bills may be removed starting in July 2025.
