Can Pakistan Compete with Soaring Energy Costs?

Industries Pay 13.5 Cents/kWh More Than Twice India & U.S.

Pakistan’s industrial power tariff has reached 13.5 cents per kWh, making it more than twice as expensive as in India (6.3 cents) and China (7.7 cents). This growing cost disparity is undermining the country’s export competitiveness and pushing manufacturers to the brink.

Global Power Price Comparison

• United States & India: 6.3 cents/kWh
• China: 7.7 cents/kWh
• European Union: 11.5 cents/kWh (17% lower than Pakistan)
• Pakistan: 13.5 cents/kWh (PKR 47/kWh after taxes & surcharges)

Why is Electricity Cheaper in Other Countries?

• Efficient Energy Mix: Countries like Bangladesh balance natural gas, coal, and hydro energy, ensuring cost stability.
• Government Subsidies: Competitive nations support industries with energy subsidies.
• Better Power Distribution: Lower transmission losses mean cheaper electricity for businesses.

IMF & Policy Pressures: The Root Causes of Rising Costs

• IMF Reforms: Pakistan has removed energy subsidies, raising costs for industries.
• Circular Debt Crisis: Inefficient power distribution and rising debts pass extra costs to consumers.
• Currency Depreciation: Unlike India and Bangladesh, Pakistan’s unstable rupee makes imported energy costlier.

Impact on Pakistan’s Industrial Competitiveness

• Exporters struggle as higher power costs make local products less competitive.
• Profitability is at risk, forcing manufacturers to cut production or pass costs onto consumers.
• Rising electricity costs make imports cheaper, reducing demand for local goods.

Solutions to Reduce Industrial Power Costs

• Energy Sector Reform: Reduce distribution inefficiencies and circular debt.
• Targeted Subsidies: Support key industries to maintain export competitiveness.
• Tax Policy Overhaul: Expand the tax base to ensure fairer revenue distribution.
• Economic Stability: Address currency fluctuations to reduce energy import costs.

Without urgent energy reforms, Pakistan’s industrial sector risks falling behind global competitors. The government must act swiftly to ensure a sustainable and competitive energy landscape.