ISLAMABAD:The industrial cross-subsidy burden has been significantly reduced by Rs123 billion under the current Shahbaz-led federal government, falling from Rs225 billion (Rs8.9 per unit) in March 2024 to Rs102 billion (Rs4.02 per unit) at present, providing notable relief to the industrial sector.
According to details shared by the power division, the industrial cross-subsidy burden has been slashed from Rs225 billion, or Rs8.9 per unit, in March 2024—when the current government assumed office—to Rs102 billion, or Rs4.02 per unit at present. This sharp reduction reflects a cumulative relief of Rs123 billion for the industrial sector.
As a result of these measures, the industrial electricity tariff, including taxes, declined substantially from Rs62.99 per unit in March 2024 to Rs46.31 per unit by December 2025. During the same period, the national average electricity tariff also dropped from Rs53.04 per unit to Rs42.27 per unit, indicating broader system-wide tariff rationalization.
The reduction in tariffs has been achieved through structural reforms in the power sector. The government terminated inefficient power plants and successfully renegotiated contracts with Independent Power Producers (IPPs), leading to a direct reduction in generation costs. Negotiations with remaining power producers are still underway to secure further tariff relief.
To further ease costs for productive sectors, the government introduced a surplus power package under which industrial and agricultural consumers can avail additional electricity at a reduced rate of Rs22.98 per unit for a period of three years. This initiative has helped lower the average industrial tariff and support economic activity.
In parallel, the government has launched a Circular Debt settlement plan aimed at eliminating outstanding liabilities within the next five to six years. Once the circular debt is fully cleared, the debt surcharge of Rs3.23 per unit currently charged to consumers will be withdrawn, providing additional relief in electricity tariffs.
The government also pointed out that the growing shift towards off-grid solar consumption has distorted subsidy requirements. Due to hybrid consumption strategies, the number of protected consumers has doubled from 11 million in 2021 to around 22 million recently. This development has placed pressure on fiscal resources and increased the cross-subsidy burden on industrial and commercial consumers, adversely affecting their competitiveness.
According to the power division, the cross-subsidy paid by commercial, bulk, and higher-consuming domestic consumers is now far higher than the level of cross-subsidy borne by the industrial sector.
While electricity tariffs reflect the government’s broader socio-economic policy objectives and not just cost recovery, authorities said multiple options are being explored to further reduce the cross-subsidy burden on industrial consumers. These include subsidy reforms and debt refinancing, in addition to the tariff reduction measures already implemented.
