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Business Recorder
10 hours ago
- Business
- Business Recorder
The cost of irrational energy levies
The federal government's decision to impose a petroleum levy of Rs 77 per litre on furnace oil (HFO), supplemented by a carbon tax of Rs 2.50 per litre, adds Rs 84,742 per ton in taxes to a fuel that otherwise costs approximately Rs 130,000 per ton. For export-oriented textile manufacturers, many of whom depend on HFO-based captive power for uninterrupted production, this will severely undermine their viability. Under current market conditions, HFO-fired captive generation costs roughly Rs 33 per kWh, broadly equivalent to prevailing grid tariffs. Once the new levies are applied, generation costs surge to nearly Rs 51 per kWh, by over 50%. At this level, HFO-based power generation ceases to be economically viable, forcing textile firms into an untenable dilemma: continue operating at a severe loss or switch to an unreliable and, ultimately, more expensive grid supply. For most mills, switching to grid-supplied power is not a viable alternative, as HFO-fired captive generation is principally used by units lacking reliable DISCO connections. Across Pakistan—and particularly in urban industrial hubs such as Lahore and Karachi—DISCOs routinely decline new industrial hookups due to constrained infrastructure and transformer capacity. Where connections are technically offered, firms are presented with demand notices running into the tens of billions of rupees merely to secure a feeder line, with no guarantee of timely service: lead times for actual energization often extend to two or three years. Under these conditions, pursuing a formal grid connection is neither commercially nor operationally feasible, aside from enduring the frequent voltage sags and load-shedding that characterize grid supply. This punitive taxation of HFO follows the so-called 'grid transition levy' on gas consumption by captive-power users—a tax that the government itself concedes is incorrectly calculated yet refuses to rectify. Officially, the transition levy is intended to align the cost of captive power with grid tariffs. In practice, however, the levy calculation is based on peak-hour grid rates that apply for only four hours each day, it relies on an eight-year-old Nepra determination of captive O&M costs, a figure that has since doubled or tripled due to inflation and currency depreciation, and incorporates a series of arbitrary errors that artificially inflate the final rate, coercing efficient captive generators onto an unprepared grid. Over the past month alone, two major textile production units served by HESCO reported repeated outages, voltage fluctuations, and sudden trippings. These disturbances burned out feeders and control panels, inflicted heavy machinery damage, and disrupted tightly scheduled production lines. Similar incidents are occurring across multiple DISCOs, underscoring that Pakistan's electricity grid lacks both the capacity and reliability to absorb additional industrial loads. Rather than addressing these structural weaknesses through targeted grid investments, modernization of aging infrastructure, and expansion of generation capacity, the government has opted for a shortcut: tax all alternative energy sources until the grid becomes the sole available option. First gas, now HFO and even solar panels. On one hand, political rhetoric extols market-driven strategy and competitive pricing; on the other, regressive taxes are being wielded to coerce industrial users onto a system that is demonstrably incapable of meeting their needs. The economic repercussions extend far beyond individual factory bills. Pakistan's textile industry accounts for over 50% of export revenues, sustains millions of direct and indirect jobs, and underpins rural livelihoods through cotton cultivation. A unilateral surge in energy costs will erode global competitiveness, and potentially trigger plant closures or relocation of production to more stable energy markets. Already, the poorly designed levy on gas-fired captive generation has slashed captive gas demand by 90%, creating a 400 MMCFD RLNG surplus that the government cannot absorb and which worsens circular debt. The same error is now being applied to furnace oil—despite domestic oversupply, demand will collapse once the levy is imposed, forcing HFO to be exported at under Rs 100,000 per ton rather than sold locally at Rs 130,000. As a result, industry will rely on a grid powered largely by imported coal and RLNG, while domestic HFO is sold abroad at a loss. With demand destroyed, the levy will generate no revenue, import costs will rise, and domestic value addition in exports—through the use of local fuels—will decline. To reverse this trajectory, the government must take three immediate steps. First, suspend the new petroleum and carbon levies on HFO until a comprehensive impact assessment is completed, involving industry stakeholders, DISCO representatives, and energy experts. Such an assessment should quantify the cost differential between captive and grid power under current conditions, and model the long-term effects on export revenue, employment, and foreign exchange earnings. And even then, any levy should be imposed gradually to allow sufficient time for consumers to adjust. Second, the calculation of the grid transition levy must be corrected to reflect actual grid power tariffs and captive generation costs and eliminate arbitrary inflation. Finally, commit to a multi-year grid-modernization plan that addresses transmission bottlenecks, reduces line losses, and provides reliable power at a regionally competitive rate of 9 cents per kWh or below. Without these corrective actions, the government risks imposing a de facto production tax on Pakistan's most vital export sector—one that it can ill afford. Coercive levies may fill the treasury in the short term, but they undermine industrial resilience, drive up unemployment, and weaken foreign-exchange reserves through the hollowing-out of export capacity. In effect, policy is being used not to bolster markets, but to strangle them—and in the process, torpedo the very growth narrative that it purports to champion. A reversal of these levies, accompanied by a clear roadmap for grid improvement, will restore confidence among exporters, stabilize power costs, and ensure that Pakistan's textile sector remains a global competitor rather than a declining casualty of misguided energy policy. Copyright Business Recorder, 2025
Express Tribune
2 days ago
- Business
- Express Tribune
NEPRA cuts base tariff by Rs1.49 per unit
The National Electric Power Regulatory Authority (Nepra) on Wednesday reduced the base power tariff by Rs1.49 per unit for fiscal year 2025-26. The recommendation in this regard has been sent to the federal government. Last month, the government moved to revise the base power tariff for the coming fiscal year, suggesting a modest cut ranging from 30 paisas to up to Rs2.25 per unit under seven different scenarios. Assuming stable economic conditions and an exchange rate of Rs280, the average base tariff would drop by Rs2.25 per unit to Rs24.75 in 2025-26, compared to the current rate of around Rs27 per unit. If the local currency depreciates to Rs300 against the dollar, the base tariff would decrease by approximately 30 paisas per unit. This decrease is primarily driven by a drop in capacity payments. Meanwhile, power consumers across the country, excluding K-Electric (KE) and lifeline users, may face a 10-paisa per unit increase in electricity tariffs under the Fuel Charges Adjustment (FCA) for May 2025. The power regulator is scheduled to hear the proposed hike of Rs0.1015 per kilowatt-hour (kWh) on June 30. The session will also be available online via Zoom. The proposal has been submitted by the Central Power Purchasing Agency Guarantee Limited (CPPA-G) on behalf of Ex-WAPDA Distribution Companies (XWDISCOs). According to CPPA-G, the actual fuel cost in May stood at Rs7.4940/kWh, compared to a reference cost of Rs7.3925/kWh, resulting in the requested hike. In May, 12,755 GWh of electricity was generated at a cost of Rs99.153 billion, averaging Rs7.7739/kWh. After deducting transmission losses of 355 GWh (2.78%) and adjustments, 12,367 GWh was delivered to DISCOs at Rs92.676 billion or Rs7.4940/kWh. Hydel power led the generation mix with 37.98% (4,844 GWh), followed by RLNG (16.99%), nuclear (15.77%), and local coal (11.08%). Imported coal contributed 6.24%, while gas added 6.92%. Other sources included RFO, solar, wind, and bagasse. The power regulator has invited stakeholders to join the hearing and submit feedback. If approved, the FCA will apply for one month only.
Business Recorder
2 days ago
- Business
- Business Recorder
No Apr FCA for Karachiites: Trade bodies demand Nepra reject PD plea
ISLAMABAD: In protest against the Power Division's intervention to block the application of negative Fuel Cost Adjustment (FCA) for April 2025 for Karachiites, several trade associations have written to the National Electric Power Regulatory Authority (Nepra), demanding that any such request be rejected outright. Letters of protest have been submitted by the Bin Qasim Association of Trade & Industry, the Pakistan Association of Large Steel Producers (PALSP), the Pakistan Tanners Association, and industrialist Rehan Jawed. During a public hearing on June 23, 2025, regarding K-Electric's FCA for April 2025, the Power Division presented a letter to Nepra, requesting a deferral of the hearing on the grounds that the government is preparing to implement a uniform FCA across the country. 'New electricity provider in Karachi': NA panel underscores need for exploring possibility The business community has raised a series of detailed legal and procedural objections, urging Nepra to consider them immediately. The Associations argue that the Ministry of Energy, as part of the executive branch, has no lawful authority to interfere in NEPRA's quasi-judicial proceedings or to delay statutory processes. Citing Sections 3 and 7 of the NEPRA Act, they emphasized that Nepra is mandated to function independently and is not subject to executive directives once a determination has been made. They maintain that the FCA is a formula-based, mechanical adjustment and that any interference is both unwarranted and illegal. The business community points to Nepra's own determination dated May 27, 2025, in the K-Electric Multi-Year Tariff (MYT) case, which clearly stated:'To maintain consistency and avoid revisions to already determined FCAs, and to ensure no additional burden is placed on consumers, the Authority has decided to allow the reference FCC of Rs. 15.9947/kWh on a units-served basis for each month of FY 2023-24.' They argue that this constitutes a binding precedent and cannot be overturned without following due legal process. The Ministry's unilateral request, they claim, has no legal merit and contradicts this established order. The Associations further state that no cabinet approval has been granted for a revised uniform tariff structure. Therefore, unless and until such approval is formally issued and notified under the relevant legal framework, NEPRA's existing FCA mechanism—based on the approved reference fuel cost—must continue. They also cited a Supreme Court judgment in Anoud Power Generation vs. WAPDA (PLD 2001 SC 340), which ruled that even if the cabinet later approves a tariff mechanism, it cannot be applied retrospectively unless specifically authorized by law. According to the associations, the Power Division's letter is no more than a recommendation and lacks any statutory authority to override Nepra's determinations or delay implementation. They emphasized that FCA adjustments are governed strictly by Nepra's Standard Procedures and the Tariff Rules, and any delay violates the requirement for timely adjustments, which are also commitments under the IMF's Memorandum of Economic and Financial Policies (MEFP). 'The Power Division's argument about subsidy management is without merit,' stated the Bin Qasim Association of Trade & Industry. 'K-Electric has already underutilized the allocated subsidy in the 2024–25 federal budget due to better recovery rates and cheaper electricity imports from the NTDC. The fiscal impact argument, therefore, lacks substance, and consumers should not be penalized for executive-level fiscal concerns.' The associations are calling on Nepra to hold an open hearing on the Power Division's letter and its proposed deferral, allowing all relevant stakeholders—especially industrial consumers in Karachi—to be heard. They argue that the principle of audi alteram partem (the right to a fair hearing) must be upheld. 'Until a new Cabinet-approved benchmark or uniform tariff is formally notified, the existing FCA reference cost of Rs. 15.9947/kWh remains legally binding. There is no justification for any executive override or temporary deferral—particularly when it would delay relief to consumers,' the associations stated. They further expressed frustration over what they perceive as selective intervention by the Power Division. 'When consumers in Karachi were burdened with higher FCAs and demanded a uniform rate, the Ministry ignored our concerns. Now, when the FCA is lower for Karachi and offers relief, the Ministry is actively trying to block it. This double standard is unacceptable and deeply troubling,' they added. The associations stressed that implementing a uniform FCA at this stage requires formal cabinet approval and a corresponding direction to NEPRA. In the absence of such legal backing, neither the Ministry of Energy nor the Central Power Purchasing Agency (CPPA) has the authority to interfere. 'We urge Nepra to reject the Ministry's request and proceed with the timely implementation of the negative FCA for K-Electric consumers in accordance with the law,' said PALSP. 'Any deviation would not only undermine the sanctity of the regulatory process but also violate consumer rights and established judicial precedent.' They also called for a requirement that any future Ministry communications affecting tariff mechanisms be subject to public and stakeholder hearings before implementation. Copyright Business Recorder, 2025
Express Tribune
3 days ago
- Business
- Express Tribune
NEPRA issues notice to K-Electric over load-shedding
Prior approval to NEPRA K-electric consumer may seen a huge relief over electricity bills. PHOTO: FILE Listen to article The National Electric Power Regulatory Authority (Nepra) has served a show-cause notice on K-Electric (KE) over failure to comply with its instructions relating to forced load-shedding. The regulator pointed out that KE had been resorting to load-shedding based on aggregate technical and commercial (AT&C) losses, which violates the Nepra Act and the Performance Standards (Distribution) Rules, 2005. According to the authority, distribution companies (DISCOs) are bound to maintain plans and schedules to shed up to 30% of their connected load at any time upon instructions from the National Transmission and Despatch Company (NTDC). This load must be divided into separate, switchable blocks that can be disconnected as directed by NTDC. Copies of these plans must be shared with NTDC. Nepra emphasised that NTDC, where possible, should provide distribution companies with advance warning of impending load-shedding to help maintain system voltage and frequency in line with the Grid Code. NTDC is also responsible for instructing distribution companies about the specific amount of load to be disconnected and the timing, using clear and unambiguous communication based on approved plans. Previously, on January 8, 2025, Nepra issued an explanation to KE under Regulations 4(1) and 4(2) of the Nepra (Fine) Regulations, 2021, citing non-compliance with its directives. The regulator stated that KE had been implementing load-shedding based on AT&C losses, which violates the Nepra Act and the Performance Standards (Distribution) Rules, 2005. In this practice, entire feeders with commercial losses – such as electricity theft and non-payment – are shut down for hours, even when some consumers on those feeders are fully compliant and regularly pay their bills. "Nepra considers this unfair to compliant consumers." In response to this practice, the authority had initiated and concluded legal proceedings, resulting in a Rs50 million penalty on KE. "Nepra continues to stress that load-shedding should only be carried out at the Pole Mounted Transformer (PMT) level and only when absolutely necessary – such as in the case of generation shortages or transmission constraints, and only under instructions from system operators." Meanwhile, KE launched a project in 2021 to install Advanced Metering Infrastructure (AMI) and Automated Meter Reading (AMR) system at the distribution transformer level, costing Rs600 million. The project aimed to identify energy losses due to theft and non-payment and to facilitate commercial benefits. KE also claimed that these meters would enable remote connection and disconnection at the transformer level. The project was completed in December 2021, with a test run conducted through June 2022. Nepra reviewed the project's records, reports and KE submissions and found that while the company has reaped commercial benefits from the AMI/AMR system, it has not utilised the technology to provide relief to consumers by performing targeted load-shedding at the PMT level, despite the capability to do so. Furthermore, during public hearings on monthly fuel cost adjustments (FCA), Karachi residents widely complained about excessive and unfair load-shedding, reinforcing Nepra's concerns. A KE spokesperson regarding Nepra's show-cause notice stated, "KE is currently reviewing the show-cause notice received from Nepra. After a comprehensive review, we will submit our response in line with the timeframe set by the authority."
Business Recorder
3 days ago
- Business
- Business Recorder
May FCA: Positive adjustment of Re0.1 per unit sought
ISLAMABAD: Power Division has sought a positive adjustment of Paisa 10 per unit in electricity tariffs for May 2025 to recover Rs 1.255 billion under the monthly Fuel Charges Adjustment (FCA) mechanism for consumers of Distribution Companies (Discos). National Electric Power Regulatory Authority (Nepra) will hold a public hearing on CPPA-G's request on June 29, 2025. According to data submitted to Nepra, total electricity generation in May 2025 stood at 12,367 GWh— an increase of 0.8 percent compared to 12,267 GWh in May 2024. PD blocks Rs4.69/unit FCA relief The overall basket price of electricity during May 2025 was Rs 7.4940 per unit, with the total cost of generation recorded at Rs 96.676 billion. According to data submitted to Nepra, in May 2025, hydel generation recorded an increase of 24 per cent to 4,844 GWh as compared to 3,906 Gwh in May 2024. The share of hydel generation was 37 per cent in total generation. Power generation from local coal-fired power plants was 1,413 GWh in May 2025 which was 11.08 percent of total generation at a price of Rs 16.8 per unit against 1,372 GWh in May 2024. It shows an increase of 3 per cent in local coal generation. Generation of 796 GWh was generated from imported coal at Rs 16.8 per unit (6.24 percent) against only 383 GWh in May 2024, showing an increase of 108 per cent. Generation from RFO stood at 20 Gwh in May 2025 as compared to 62 Gwh in May 2024, negative 68 per cent at a rate of Rs 28.5993 per unit. Electricity generation from gas-based power plants was 833 GWh (6.92 percent) at Rs 12.8104 per unit against 1,110 Gwh in May 2024(20 per cent reduction). Generation from RLNG was 2,168 GWh (17 percent of total generation) at Rs 23.7349 per unit. Electricity generation from nuclear sources was 2,012 GWh at Rs 2.2467 per unit (15.77 percent of total generation) against 2,360 GWh in May 2024 showing a decrease of 15 per cent and electricity imported from Iran was 36 GWh at Rs 2.5155 per unit. Power generation from baggasse recorded 34 GWh at a price calculated at Rs 5.9810 per unit. The energy generated from wind was recorded at 433 GWh, 3.39 percent of total generation and solar at 116 GWh, 0.91 percent of total generation in May 2025. The total energy generated was 12, 755 GWh, against 12,617 GWh in May 2024, showing an increase of 1.2 per cent at a basket price of Rs 7.7739 per unit. Copyright Business Recorder, 2025
