The recent tariff cut of Rs 1.14 fails to satisfy businessmen, triggering strong criticism from industry leaders and business associations. While the decision was intended to bring some relief to power consumers in Pakistan, especially in the industrial sector, the reaction tells a different story. For most businesses, this reduction is simply not meaningful when set against rising operating costs, high inflation, and past promises of “significant relief.”
This article takes a closer look at the full story, what the tariff cut means, why it’s seen as inadequate, and how it reflects the ongoing disconnect between regulatory decisions and industry expectations.
Understanding the Power Tariff Cut: What Was Announced
On July 1, 2025, Pakistan’s National Electric Power Regulatory Authority (Nepra) announced a reduction in the national average electricity tariff by Rs 1.14 per unit. This revision applies across almost all consumer categories, including commercial, industrial, and agricultural users, but not lifeline domestic consumers.
Here’s a quick summary of what was approved:
- New national average tariff (excluding taxes): Rs 34/unit for FY2025-26
- Old rate: Rs 35.50/unit
- Effective revised rate after subsidies: Rs 31.59/unit (down from Rs 32.73)
- Flat Rs 1.14 per unit reduction across most categories
Despite these figures, the tariff cut of Rs 1.14 fails to satisfy businessmen, particularly in Karachi, Pakistan’s commercial hub.
Why Business Leaders Are Unimpressed
According to leading business organizations such as the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Karachi Chamber of Commerce and Industry, and Korangi Association of Trade and Industry, the Rs 1.14 cut is far too small to offset the high cost of doing business.
Here’s what they are saying:
- “Too minuscule”: With the effective power tariff still hovering around Rs 40 per unit, industry leaders argue that a Re 1.14 cut brings no real financial relief.
- Comparison with last year: Businesses were paying around Rs 30 per unit last year. Even with the new reduction, power prices remain significantly higher.
- Rushed process: Many business associations also objected to the speed of the approval process. The Power Division filed its petition on June 28, and it was passed the next day. This gave no real opportunity for business representatives to provide input, violating the seven-day legal window meant for public feedback.
This combination of a small relief amount and a lack of transparency has led to frustration across the business community.
Impact on Industrial Costs and Productivity
The tariff cut of Rs 1.14 fails to satisfy businessmen because it doesn’t address the core issue: electricity remains expensive, especially during peak hours. Industrialists have been pushing for the removal of peak and off-peak billing, which forces many factories to shut down during high-tariff hours.
Electricity is a critical input for manufacturing, and without a meaningful reduction in costs, businesses can’t operate efficiently or competitively. Even a 3–10% rate drop across different categories doesn’t go far enough when absolute tariffs remain high.
How the Tariff Changes Affect Various Sectors
Here’s a breakdown of how the new rates apply across sectors:
Industrial Consumers
- New rate: Rs 33.48 per unit
- Old rate: Rs 44.32 per unit
- Reduction: Approx. 25%, but mainly due to subsidy restructuring
Commercial Consumers
- New average: Rs 45.43/unit (down from Rs 46.58)
- Reduction: ~Rs 1.15 only
Agricultural Sector
- New average: Rs 30.75/unit (previously Rs 31.90)
- Reduction: Rs 1.15 per unit
Domestic Protected Consumers
- 1–100 units: Now Rs 10.54 (previously Rs 11.69)
- 101–200 units: Rs 13.01 (was Rs 14.16)
Lifeline customers (50–100 units/month) saw no change.
While the numbers show slight relief, the core issue remains unchanged, tariffs are still too high compared to previous years, and the relief doesn’t extend to peak-hour burdens or long-term cost reductions.
Business Expectations vs. Reality
This situation highlights a growing gap between government policy and business needs. The power tariff debate is not just about rates, it’s about trust, long-term planning, and economic competitiveness.
Industry players were hoping for a comprehensive energy pricing reform, something that would bring predictability and cost-effectiveness. Instead, they received a symbolic cut that doesn’t impact operational strategies or pricing structures.
Even the government’s defense, citing reduced capacity payments and better exchange rates, doesn’t translate into tangible benefits for factories trying to stay afloat or exporters facing global competition.
Policy Transparency and Public Trust
The lack of public consultation before finalizing the tariff was another sticking point. Holding a public hearing just one day after publishing the government’s petition violated standard procedure and further eroded business trust.
Transparency in tariff setting is essential. A rushed and opaque process signals instability , something no investor or entrepreneur appreciates.
What Needs to Change
If policymakers want to support economic recovery and growth, future tariff adjustments should:
- Be significant enough to make a difference in production costs
- Include input from industry stakeholders
- Offer long-term clarity on power pricing
- Abolish the peak/off-peak billing structure for industries
The business community needs predictable, affordable energy to plan investments and operate efficiently. Anything less feels like a temporary fix to a deeper problem.
Conclusion: More Than Just Numbers
The tariff cut of Rs 1.14 fails to satisfy businessmen because it’s more about what it represents than what it delivers. For most businesses, the move signals that the government is out of touch with real-world economic pressure points.
Until tariff reforms go beyond symbolic gestures and start addressing structural concerns, including operational transparency, competitive pricing, and energy accessibility, business confidence will remain low.
