SAI president says policy of cross-subsidy on industrial electricity tariffs hurting industrial activities

KARACHI: President of the SITE Association of Industry (SAI), Ahmed Azeem Alvi has expressed serious concern over the continued burden of cross subsidy imposed on industrial electricity tariffs, stating that this policy is weakening industrial viability and discouraging scale, investment, and formal growth.

He stated that industrial tariffs are currently carrying a cross subsidy of Rs4.5 to Rs7 per unit, adding nearly 20 percent extra cost to electricity that is already uncompetitive. According to him, industry is barely able to carry its own cost structure and this additional burden has pushed many units to the brink.

Ahmed Azeem Alvi pointed out that while Pakistan has a large number of small industrial units, the country has failed to establish and retain large scale industry, largely due to distorted energy pricing.

He said policies that penalize consumption and expansion naturally prevent industries from growing in size and efficiency.

He further noted that the number of protected consumers has increased sharply in recent years, yet instead of supporting them through fiscal space, the government is using industry as a balancing tool.

This approach, he said, is neither sustainable nor fair, especially when industry already pays in full and on time.

Commenting on the Incremental Consumption Package, Alvi stated that the scheme is fundamentally flawed and internally inconsistent. Industries that consumed higher electricity during the reference period from December 2023 to November 2024 have been rendered ineligible, even though they represent stable and genuine demand.

SAI President highlighted that the load factors applied in the package have no regulatory or technical basis for incremental demand creation and appear to have been lifted from theft and detection billing frameworks meant for enforcement, not incentives. He said this anomaly has completely diluted the purpose of the package.

“As designed, the package will not increase demand,” he warned. “It will only cause demand shifting within industry, creating artificial winners and losers and further distorting consumption patterns.”

Ahmed Azeem Alvi also questioned repeated claims by the Power Ministry regarding improved performance, stating that if the sector has improved, a competitive industrial tariff of around 9 cents per unit should already have been achievable. The absence of such a tariff, he said, exposes the gap between claims and ground realities.

He urged the government to immediately remove cross subsidy from industrial electricity tariffs, withdraw the flawed incremental package in its present form, and redesign incentives on transparent and rational principles.

He states that industrial revival, export growth, and employment generation cannot be achieved by penalizing consumption and rewarding inefficiency. Without correcting these structural distortions, policy announcements will continue to fail in delivering real economic outcomes.

Copyright Business Recorder, 2026