‘Conditional subsidy’: experts say power tariff cut for industry, agriculture not enough

Pakistan government’s recent reduction in electricity charges for the industrial and agricultural sectors was a conditional subsidy, and high power tariff was only one of the factors lowering the country’s export performance and agricultural productivity, experts said.

Earlier this month, the National Electric Power Regulatory Authority (Nepra) approved the government announced reduction in electricity charges for the industrial and agricultural sectors “to ease the cost of doing business and support economic growth”.

Prime Minister Shehbaz Sharif had announced in October that industries and the agricultural sector would be provided additional electricity at subsidised rates over the next three years.

Speaking to Business Recorder, co-founder of Agriculture Republic Aamer Hayat Bhandara termed the announcement a “conditional subsidy”.

“If a farmer used 300 units in December 2024 and now uses 400 units in December 2025, subsidy will be provided only on the additional 100 units,” he explained. “However, electricity demand has reduced in the past few years,” Bhandara added.

Under the new tariff structure, the price of additional electricity units for the agriculture sector was reduced from Rs38 to Rs22.98 per unit, while the industrial sector’s rate was brought down from Rs34 to Rs22.98 per unit.

Bhandara was of the view that electricity consumption should increase because the cost of generating electricity was still being borne by the state.

“If we give subsidies to the farmers this way, to some extent the farmers will also have compensation and the state’s energy cycle will also run better.”

Bhandara highlighted that a couple of important things needed to be discussed.

“One is that what will be the practical effect? Because the matters of Discos [ power distribution companies] will have to be enforced by the government properly about the proper readings are about it.”

He further said honesty and accountability would have to be ensured so that the farmers could benefit from the package as much as possible.

“When the cost of production of crops will be lesser, certainly it will also have an impact on the produce in the future.”

Discussing climate change, the co-founder of Agriculture Republic said there was a correlation between weather and electricity consumption.

“If it rains more, maybe there will be less consumption. But if it rains less and there is a drought-type situation, I think more tools will be used to meet the water requirement.”

Meanwhile, chief organiser of Pakistan Business Forum (PBF) Ahmad Jawad told Business Recorder the recent Nepra approval was not a concessional rate, but rather applied to consumers who utilise additional units.

“During winters, power consumption remains lower, and Power ministry aims to utilise excess electricity.

“PBF advocates for revising industry and agriculture tariff rates to 8 cents per dollar in all 12 months to enhance regional competitiveness,” he said, noting that power tariff was one of the factors to lower exports and agriculture performance.