ISLAMABAD: Consumers of Power Distribution Companies (Discos) and K-Electric are set to pay an additional amount exceeding Rs 18 billion under the monthly Fuel Charges Adjustment (FCA) at Rs 1.78 per unit, along with 18 percent GST.
The increase is primarily attributed to an unprecedented 14 percent rise in power generation (1,100 million units) in January and a revision in the FCA reference for January 2026, carrying a financial impact of Rs 1.35 per unit.
This emerged during a public hearing on the FCA adjustment for January 2026. The hearing was chaired by Nepra Chairman Waseem Mukhtar, along with Member (Tariff and Finance) Amina Ahmed and Member (Development) Maqsood Anwar Khan. The CPPA-G and IMSO teams were led by CEO CPPA-G, Rihan Akhtar.
READ MORE: CPPA-G seeks Rs1.78/unit FCA hike to recover Rs15.6bn
CPPA-G informed the authority that although it had sought a positive adjustment of Rs 1.78 per unit for January, to be recovered in March 2026, the 28 paisa per unit already charged in February 2026 would be done away with, reducing the net impact to Rs 1.50 per unit.
The hearing mainly focused on the implications of the revised FCA reference and what industry representatives termed inaccurate projections affecting the cost of generation. They argued that the relief extended to industry had effectively been nullified due to the revision in the FCA reference.
During rebasing, the average reference price was increased by Rs 1.3385 per unit while the total tariff remained unchanged. Since fuel is a variable cost, this adjustment effectively raised the tariff by Rs 1.3385 per unit.
Member (Tariff and Finance) observed that although CPPA-G’s explanation regarding FCA and Quarterly Tariff Adjustment (QTA) was technically understandable, the anticipated benefits were not visible on the ground.
“We were informed that the incremental package would provide certain benefits and that QTA would decline.
However, QTA still appears high. While the logic presented by CPPA-G may be sound, outcomes are not aligning with expectations. FCA and QTA are continuing mechanisms, yet developments seem to be moving in the opposite direction of what was envisaged,” she remarked.
CPPA-G CEO Rihan Javed did not directly address the concerns and stated that it was hoped projections would remain aligned with assumptions to avoid significant deviations between projected and actual figures.
He added that since FCA was positive in January and expected to remain positive in February and March 2026, QTA would decrease by Rs 2.25 per unit.
“Higher FCA means lower QTA, and lower FCA means higher QTA,” he explained.
Member (Development) Maqsood Anwar Khan noted that FCA could remain positive in the coming months due to costly generation from Residual Fuel Oil (RFO).
Rehan Javed of FPCCI criticized the Power Division and CPPA-G for revising the FCA reference and urged Nepra to take suomotu notice and reverse the decision. He maintained that under the previous reference, the FCA impact would have been only 57 paisa per unit, compared to Rs 1.78 per unit under the revised reference.
There were also apprehensions that certain hidden costs may have been incorporated into the revised FCA reference.
Director General (Tariff) NEPRA, Muhammad Yousaf, suggested that the FCA impact should be evaluated after excluding the 14 percent (1,100 million units) increase attributed to the incremental package. He noted that industrial consumption rose by 46 percent in January 2026 as a result of the package.
Tanveer Barry, representing KCCI, stated that although the base tariff was reduced by Rs 0.60 per unit after rebasing, the upward revision in the fuel reference led to a substantial positive FCA for January 2026.
“We are already paying positive quarterly adjustments, meaning the Rs 4 relief announced by the Prime Minister will effectively translate into only 50 percent benefit for industry. The industrial sector is bearing a cross-subsidy burden estimated at between Rs 4.5 and Rs 7 per unit, with a cumulative impact exceeding Rs 131 billion. I do not agree that industry will benefit from a positive FCA,” he said.
Aamir Sheikh, representing the textile industry, strongly opposed the January 2026 tariff rebasing, arguing that it resulted in a Rs 1.35 per unit increase.
He said industry had been informed during rebasing that although calculations indicated a reduction of 68 paisa per unit, tariffs would remain unchanged due to an increase in protected consumers. However, by keeping the nominal tariff unchanged while raising the fuel reference price by Rs 1.35 per unit, the tariff was effectively increased.
According to him, the tariff would have remained genuinely unchanged only if the nominal tariff had been reduced by Rs 1.35 per unit when the fuel reference was revised. Instead of a 68 paisa reduction, industry faced what he described as a concealed increase of Rs 1.35 per unit — nearly Rs 2 per unit in overall impact — effectively halving the Rs 4.04 relief announced by the Prime Minister.
He further stated that industry would pay higher tariffs in January 2026 despite official claims that rebasing did not raise tariffs. He also pointed out that transmission losses of 3.83 percent were included in the January FPA, compared to 2.56 percent in November and 3.05 percent in December, reflecting an increasing trend.
“It is also an unfortunate coincidence that nuclear plants go offline when hydel generation declines during winter. The situation further worsened by the scheduled maintenance shutdown of Engro’s local coal-based plant, resulting in greater reliance on expensive imported fuels such as coal, HFO, and RLNG,” he added.
Aamir Sheikh also stated on record that CPPA-G had noted during the hearing that the QTA for January stood at Rs 2.55 per unit in favor of consumers. Industry representatives expressed the hope that this figure would not be revised when the QTA for January, February, and March is formally announced.
“Charging Rs 1.78 per unit now while providing Rs 2.55 per unit relief later in May places severe cash flow strain on an already struggling industry.
The government should avoid imposing this high FPA immediately and instead adjust it against the forthcoming QTA,” he concluded.
Copyright Business Recorder, 2026