Industrial tariff reform plan under review

Minister orders stakeholder consultations as indigenisation policy yields Rs12.7b local contracts

ISLAMABAD:

The Power Division is considering the introduction of a new optional tariff mechanism for industrial consumers, aimed at improving electricity utilisation efficiency and enabling cost-reflective pricing based on time-of-use consumption patterns.

According to an official statement issued on Wednesday, the proposal is being developed under the direction of Federal Minister for Power Division Sardar Awais Ahmed Khan Leghari, with several internal consultative and technical meetings already held to shape the framework.

Under the proposed model, industrial consumers will have the option to adopt a multi-slab tariff structure, where electricity pricing is linked to average marginal cost signals across defined time-of-use slabs. The approach is intended to better reflect the actual cost of electricity supply during different periods of demand.

The tariff will comprise two main components. Fixed charges will be determined based on Maximum Demand Indicators (MDI) and are expected to be relatively higher, encouraging consumers to manage and reduce peak demand. Variable energy charges will be rationalised and aligned more closely with actual energy costs, allowing more cost-reflective pricing.

The structure is expected to support improved load management by enabling industries to shift operations to lower-cost periods. It is also aimed at promoting electricity consumption during off-peak hours, improving the system load factor and reducing pressure on the grid during peak demand periods.

Officials said the proposed mechanism is also intended to reduce the need for costly capacity additions by incentivising peak demand reduction. The framework is expected to support industrial productivity and competitiveness through more predictable energy costs.

The minister has directed that the proposed tariff regime be refined through extensive stakeholder consultations to ensure inclusivity and effectiveness. Consultations will be held with industrial consumers, chambers of commerce and trade bodies across the country, with feedback to be incorporated into the final design. The first consultative conference will be held online on March 26.

Separately, the minister said the National Grid Company's indigenisation policy had resulted in contracts worth Rs12.673 billion awarded to local industries, along with around 40% savings on transmission line conductors compared to imported alternatives.

He said the policy had enabled local manufacturing through educational orders, joint ventures and the establishment of local subsidiaries. So far, nine educational orders worth Rs900 million have been issued and 11 local firms registered for capability development.

Officials said the initiative is contributing to foreign exchange conservation and enabling timely delivery of materials.