PAKISTAN’S electricity sector stands at a critical inflection point. While the country has amassed more than enough generation capacity to meet its needs, our tariff structure, following an archaic International Monetary Fund (IMF) driven cost-plus regime, continues to punish demand rather than enable it.

The result is a grid increasingly starved of industrial users, while factories defect to off-grid solutions at scale. This is not just a power sector issue; it is an industrial crisis that is spiralling into a low-growth trap for Pakistan. A macroeconomic focus for maintaining balance of payments is great, but losing sight of the forest for the trees may have disastrous consequences for the country’s population.

Electricity, when priced competitively, is a catalyst for economic expansion. When overpriced, it becomes a tax on production and employment. Pakistan has, unfortunately, drifted into the latter category, and any attempt to escape the abyss fails, because for a hammer everything is a nail.

Pakistan’s industrial power tariffs are among the highest in Asia, hovering around 13-15 cents. In contrast, India charges closer to 12 cents, Bangladesh 9 cents, and Vietnam just 8 cents. Malaysia, a long-standing industrial magnet, offers electricity at a meagre 4 cents per unit. It’s no surprise that investors favour locations where energy costs don’t break the business model.

Pakistan must pivot from a supply-centric mindset to a demand-led decentralised policy

Europe’s experience during the 2021–2023 energy crisis echoes this trend, wherein soaring prices led to factory closures and deindustrialisation. Germany alone spent nearly 4 per cent of its GDP subsidising power for users — an unsustainable stopgap. The lesson is clear that without affordable energy, industry cannot survive.

Pakistan has a surplus generation capacity of 46,605........

© Dawn Business