The All Pakistan Textile Mills Association (APTMA) has raised urgent concerns regarding Pakistan’s energy policies, which are negatively impacting the country’s industrial sustainability and export competitiveness. The lack of regionally competitive energy pricing is hindering economic recovery, deterring investment, and accelerating the decline of industrialization.
Despite assurances from top officials that industrial electricity tariffs would be reduced to 9 cents/kWh by April 2025, the reality has been quite the opposite. Industrial electricity costs have increased from 10.4 cents/kWh in May to 11.6 cents/kWh in August, with further hikes expected. Although there was a temporary decline in costs due to increased hydel generation, this relief is not sustainable. Industrial consumers are still paying significantly more than their counterparts in countries like India, Bangladesh, China, and Vietnam, where rates range between 5 to 9 cents/kWh.
The Ministry of Energy’s recent policies, such as the arbitrary gas levy for captive power and the push for grid transition, have created more problems than they have solved. Many industries, particularly those with high-efficiency combined heat and power (CHP) plants, struggle to transition due to high costs and poor grid reliability. This instability has led to significant operational losses due to production downtimes and voltage fluctuations, forcing many units to rely on gas to meet their energy needs—a costly endeavor exacerbated by the punitive gas levy.
The adverse effects of these energy policies are evident, with a shift towards solar energy among residential, agricultural, and commercial consumers. Poor pricing policies have made grid energy unaffordable, and the government’s expectations of generating Rs. 105 billion from the gas levy on captive use have not materialized, as industrial gas demand has plummeted.
Furthermore, the gas sector is under strain, with a surplus of regasified liquefied natural gas (RLNG) being diverted to households at a subsidized rate while industry struggles with higher costs. Local gas production has declined, with OGDCL anticipating significant financial losses and exploration activities almost coming to a halt.
Another notable issue is the extension of the Rs. 3.23/kWh circular debt surcharge for an additional six years, transforming what was intended as a temporary measure into a permanent burden for consumers. This surcharge allows the government to shift the consequences of systemic failures onto consumers without addressing underlying issues.
The industrial electricity costs are further inflated by a cross-subsidy exceeding Rs. 130 billion annually to support certain protected consumer categories, pushing the effective cost for industrial users significantly above the actual service cost of around 8–9 cents/kWh. With more residential consumers adopting solar energy, a growing number are qualifying for subsidies while still using less grid electricity.
It appears that the government’s focus is shifting towards providing subsidized electricity rather than fostering economic growth and job creation. The pressing question remains: who will fund this subsidized electricity as the base of paying consumers dwindles amid increasing adoption of solar and battery storage?
The Competitive Trading Bilateral Contract Market (CTBCM) exemplifies the disconnect between policy and industrial needs, with prohibitive wheeling charges making bilateral purchases financially unfeasible. The limitations on capacity further restrict access to open markets for industries.
These cumulative policies have resulted in stagnant export growth, subdued industrial activity, and diminished new investments—seriously jeopardizing Pakistan’s economic future.
