Pakistan’s tariff debate has again drifted into familiar territory, with industry arguing that the government’s load factor assumptions for the 2026 rebasing cycle are unrealistic and overly rigid. The FPCCI wants the reference load factor for industrial baselines set closer to 40 percent, arguing that present economic conditions, and solar uptake have pushed actual utilization far below historic norms.
The request sounds reasonable until the underlying structure of the power system is considered. Load factors in Pakistan are not arbitrary or invented for the new tariff plan. They are built into the Consumer Service Manual, into the way distribution infrastructure is planned, and into the cost recovery framework that all users ultimately pay for.
Under the Consumer Service Manual, an applicant with a sanctioned load above a certain threshold is provided supply through a dedicated transformer. If the transformer has spare capacity, additional connections can be fed from the same unit. If the capacity is insufficient, the transformer must be augmented or replaced on a cost deposit basis.
This design logic means that every industrial consumer has already been allocated transformer and feeder capacity sized to an expected utilization profile. Those expected profiles are the same load factors that Nepra continues to apply today. They were not drawn up for tariff benchmarking. They are engineering standards used to size equipment and assign costs.
When an industry that was planned on a 60 percent load factor suddenly wants the baseline reset to 40 percent, the unused capacity does not vanish. It becomes stranded capacity on the system. Transformers and feeders sized for a certain utilization end up underloaded, yet their fixed costs remain unchanged. That burden then shifts onto the overall tariff structure.
Industry’s frustration is understandable. Weak orders, high production costs, and rising competition from regional peers have squeezed margins. Many firms have turned solar to keep costs predictable. These choices, however, depress the load recorded on the grid. If policy benchmarks are adjusted downward simply because grid consumption has been voluntarily reduced, the system ends up rewarding behaviour that drains demand from a network already suffering from chronic underutilization.
The government’s incremental consumption package aims to reverse this problem. The Rs22.98 per unit rate for additional consumption is designed to make daytime electricity from the grid sufficiently attractive for factories to shift marginal load back to the system. The structure is subsidy neutral and uses existing surplus capacity, especially during solar hours, rather than creating new financial liabilities. It is not intended to lower the entire tariff. It is meant to nudge gradual recovery in utilization levels without inflating the circular debt.
Industry argues that the incremental rate may not be low enough to move the needle. That may be true for some sectors, particularly exporters with narrow margins. Even then, it does not change the logic that the baseline must reflect the system’s engineering and financial requirements. Pakistan does not have the fiscal space to subsidize consumption across the board. Nor can it base long term tariff planning on a load factor that reflects the deepest point of a downturn. A 60 percent reference remains aligned with the standards on which consumer connections were planned, transformers were sized, and costs were allocated.
This does not mean the policy is beyond improvement. If specific clusters face supply quality issues, targeted interventions can and should be made. If transitional relief is needed for severely stressed industries, that can be negotiated separately. What cannot be compromised is the integrity of the load factor benchmark, which anchors both engineering design and cost recovery. Resetting it to 40 percent would formalize today’s slump as the long-term norm and leave the system carrying even more unused capacity.
Pakistan’s power sector needs demand to rise, not expectations to fall. The incremental consumption package is one of the few tools that can lift utilization without new subsidies or new capacity. Weakening its foundations by redefining load factor benchmarks would only push the system deeper into the same cycle it is trying to escape.
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