ISLAMABAD: Leading business associations — including the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the Korangi Association of Trade and Industry (KATI), and the Bin Qasim Association of Trade and Industry (BQATI) — have urged the government to revise the proposed Industrial Power Incremental Consumption Package, calling for a reduction in the incremental tariff from Rs22.98/kWh to Rs16/kWh to ensure meaningful relief for manufacturers.
The National Electric Power Regulatory Authority (NEPRA) will hold a public hearing on Tuesday (Nov 11) to review the package, which has already been approved by the federal cabinet. The proposal aims to stimulate industrial and agricultural electricity consumption while reducing the national subsidy burden.
In letters addressed to NEPRA’s Registrar, the industry bodies acknowledged that the plan could potentially reduce subsidy requirements by up to Rs300 billion, but argued that industries continue to shoulder an excessive cross-subsidy burden — estimated at Rs131 billion according to NEPRA’s own calculations.
“If fiscal space now exists, it should be used to reduce this inequity rather than continue making industries subsidize other consumer categories,” the FPCCI said. “With most solar and protected consumers already shifted from the normal tariff structure, industries are left paying far above their cost of service.”
The FPCCI noted that industrial tariffs have already climbed from Rs34 to nearly Rs38 per unit due to quarterly and fuel cost adjustments, meaning the proposed Rs22.98/kWh incremental rate offers limited relief. It therefore recommended setting the incremental rate at Rs16/kWh to make the package effective and restore competitiveness.
Call for Simplified and Fair Benchmarking
The FPCCI also raised concerns over the benchmarking methodology, including the 60% load factor assumption, treatment of category-change cases, and the 2.8% annual escalation factor, arguing that these parameters have led to confusion and inequity.
To ensure consistency and fairness, the FPCCI proposed a three-year weighted average formula to determine the baseline load factor:
- 50% weight for FY2024–25
- 30% for FY2023–24
- 20% for FY2022–23
This approach, the FPCCI said, would apply uniformly to all consumer categories, including captive and non-captive users, load-extension cases, and new connections — eliminating artificial escalation factors and simplifying implementation for DISCOs.
For new industrial consumers or those without prior data, the FPCCI suggested applying a 50% load factor for baseline determination throughout the package’s duration to ensure parity and predictability.
Addressing Captive-to-Grid Transition
The FPCCI emphasized that its proposed framework would fairly accommodate industries transitioning from captive to grid-based power after new gas levies, as it gives higher weight to FY2024–25 consumption, reflecting recent usage patterns and preventing misclassification of such industries as “new.”
Opposition to Fixed Reference Period
The business community criticized the fixed reference period (Dec 2023–Nov 2024), calling it unfair and counterproductive. They argued that it penalizes industries that performed well during that timeframe while rewarding those that underperformed.
“Two factories producing the same product in the same city would be treated unequally — the one operating efficiently gets no room to grow, while the underutilized one gains an advantage. As a result, total demand doesn’t increase; it merely shifts,” the FPCCI noted.
The chamber proposed using the three-year weighted average method instead, giving every industry a fair, performance-based opportunity to expand.
Call for Long-Term Stability
The FPCCI further urged that the incentive scheme be extended for a sufficient duration — or linked to the commissioning of new industrial capacity — since genuine expansion projects require long-term investments and lead time before production stabilizes.
“The entire purpose of this package is to stimulate demand. Its calculation method must remain clear, verifiable, and easy to audit,” the FPCCI stressed.
The chamber said that its proposed transparent, data-driven, and simplified methodology would ensure fairness, improve compliance, and promote sustainable industrial growth.
Warning Against Current Design
However, the business community cautioned that the package in its current form may fail to achieve its objectives.
“If implemented without corrections, it risks disappointing both the government and industry by failing to generate the expected increase in consumption or revenue,” the FPCCI warned.
The FPCCI urged NEPRA and the Ministry of Energy (Power Division) to adopt its revised formula to make the package an effective instrument for industrial revival.
“True reform can only be measured by competitiveness and growth — not by temporary fiscal savings achieved at the expense of the productive sector,” the FPCCI concluded.
Story by Mushtaq Ghumman
