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