Molly Ayala
Pakistan has seen fluctuations in electricity prices in recent years, with the base tariff for domestic consumers reaching PKR 48.84 per unit in July 2024. This hike impacted a majority of households, although those consuming up to 200 units per month were exempt for a period of three months. Small businesses in Pakistan typically pay lower electricity prices, approximately 94.55% of the rates paid by larger enterprises. The country's energy mix consists largely of fossil fuels, with renewable sources like wind, solar, and hydro accounting for smaller portions of electricity production. Recent developments in February 2025 suggest a potential reduction in electricity prices, as Prime Minister Shehbaz Sharif indicated that the International Monetary Fund (IMF) would not oppose such a move.
| Characteristics | Values |
|---|---|
| Base Tariff | PKR 48.84 per unit |
| Residential Price | PKR 19.190 per kWh or USD 0.067 |
| Business Price | PKR 43.860 per kWh or USD 0.154 |
| Small Business Price | 94.55% of the price paid by big businesses |
| Low Consumption Household Price | 27.77% of the price paid by high consumption households |
| Bulk Consumers Price | PKR 59.96 per unit |
| Industrial Consumers Price | Base tariff maintained |
| Up to 200 units per month for three months | Excluded from increase |
| DISCOs and K-Electric Consumers | Price reduction in February 2025 |
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What You'll Learn
Electricity prices for small businesses
The cost of electricity for small businesses in Pakistan varies depending on the province in which the business operates. Pakistan's electrical resources are controlled by WAPDA, which works to guarantee the availability of energy. The National Electric Power Regulatory Authority (NEPRA) oversees and controls the entirety of Pakistan's electrical supply and sets the supply rate and pricing structure.
In Punjab, Sindh, Balochistan, and KPK, there are divisional electric supply corporations that deliver electricity at various prices. The Lahore Electric Supply Company (LESCO), for example, is a Pakistani government-owned electric distribution company based in Lahore, Punjab, and it covers the entire area of Lahore. K-Electric (KE) is another supplier that distributes electricity in Karachi and the surrounding areas.
The cost of electricity in Pakistan has been increasing, with the last recorded increase on April 5, 2025, by Rs4.56 per unit. The price per unit varies across provinces, and the unit rate determines how the unit price is used. The cost of power per unit has increased to 65 rupees, with a minimum price of 22 rupees per unit.
Small businesses in Pakistan pay 94.55% of the prices paid by big businesses for electricity. To calculate the cost of electricity, the units consumed are multiplied by the basic tariff, and taxes and head charges are included. If consumption occurs during peak hours, the number of units is multiplied by the peak rate and added to the bill.
Due to the increasing electricity rates, many businesses and households in Pakistan are switching to solar energy. Solar panel prices have decreased, making it an affordable alternative to traditional electricity.
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Household electricity costs
The cost of electricity in Pakistan has been a dynamic issue, with the government announcing a reduction in electricity prices in February 2025, which was a positive development for consumers. Prior to this, in July 2024, the base tariff for domestic consumers was PKR 48.84 per unit, following an increase of PKR 5.51 per unit. This increase excluded those using up to 200 units per month for a period of three months, which Prime Minister Shehbaz Sharif subsidised to encompass 94% of electricity consumers.
The cost of electricity for Pakistani households varies depending on their consumption levels. As of December 2024, the residential electricity price was PKR 19.190 per kWh, which is approximately USD 0.067. This price includes the cost of power generation, distribution and transmission charges, as well as all associated taxes and fees.
Compared to other countries, Pakistan's residential electricity prices are relatively low. They are 43.83% of the world average and 86.07% of the average price in Asia. However, it's important to note that within Pakistan, the electricity prices vary based on consumption levels. Households with low electricity consumption pay 27.77% of the price paid by households with high electricity consumption.
Electricity prices for businesses in Pakistan are typically higher than those for residential consumers. As of December 2024, the electricity price for businesses was PKR 43.860 per kWh, which is about USD 0.154. This price includes the same components as the residential prices and is influenced by the energy mix used to generate electricity in Pakistan, which primarily consists of fossil fuels, hydro, and nuclear sources.
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Cost of electricity production
The cost of electricity in Pakistan has been on an upward trajectory, with the base tariff for domestic consumers recently hiked up to PKR 48.84 per unit. This increase, approved by NEPRA (the country's power regulatory authority), excludes those utilising up to 200 units per month for a period of three months. The Pakistani government has maintained the base tariff for electricity used by industrial consumers.
The frequent increases in electricity prices, along with hikes in natural gas, petrol, and diesel prices, have been significant contributors to inflation, subsequently diminishing industrial production. Pakistan's electricity sector is a developing market that has faced challenges in balancing supply with the rising demand for electricity. The country has witnessed load shedding and power blackouts, with a notable crisis in 2007 when production plummeted by 6000 MW, resulting in widespread blackouts.
Pakistan's electricity generation capacity has witnessed substantial growth, with a 64% increase between 2013 and 2020. As of March 2025, the installed electricity generation capacity stood at 46,605 MW. The electricity transmission network can handle over 53,000 MVA, and in FY 2024, Pakistan generated 127,523 GWh of electricity. More than 50% of this electricity was produced from hydropower, renewable, or nuclear sources, while fossil fuels, though constituting 55.6% of installed capacity, are underutilised, generating only 46.3% of the electricity.
The underutilisation of generation capacity remains a critical issue, and Pakistan has been working to address this challenge. The country has added over 2,813 MW of capacity to the grid through domestic solar net metering. However, Pakistan's overall power consumption declined by 3.6% in FY 2024-25 due to increased power tariffs, off-grid solar solutions, and decreased industrial activity.
To meet the escalating electricity demands, Pakistan has turned to coal power plants that utilise cheap domestic coal. This shift has resulted in a significant growth in electricity generation capacity from coal. However, there are concerns about the environmental impact of this decision, especially considering the country's vulnerability to natural disasters, as evidenced by the 2010 floods and the 2005 Kashmir earthquake, which damaged power stations and other energy infrastructure.
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Government subsidies
The cost of electricity in Pakistan has been on the rise, with the base tariff for domestic consumers being PKR 48.84 per unit as of July 2024. This increase, approved by NEPRA, excludes those using up to 200 units per month for three months. Despite this, the Pakistani government continues to provide substantial electricity subsidies to alleviate the burden on its citizens.
Pakistan has been grappling with deep energy crises, forcing the government to offer large subsidies to cushion consumers from the rising electricity costs. The government pays over one trillion rupees as a Tariff Differential Subsidy (TDS) to bridge the gap between the uniform tariff applied across all electrical distribution companies and their varying service costs. This subsidy is funded through the country's budget development fund.
While subsidies aim to provide relief to lower-income households, research suggests that they may not always achieve their intended outcome. A study examining the welfare impact of electricity subsidy reforms in Pakistan found that subsidies can increase deadweight loss and reduce consumer welfare. However, the complete removal of subsidies would make electricity unaffordable for underprivileged families. Therefore, the challenge for policymakers is to determine the optimal level of subsidy that minimizes economic impact while benefiting the maximum number of users.
The distribution of electricity in Pakistan is dominated by vertically integrated companies like WAPDA and K-Electric, operating within a single-buyer model. This monopoly structure has been blamed for the absence of an equitable pricing regime. The increase in the cost of electricity generation, particularly with the growing share of thermal electricity from Independent Power Producers (IPPs), has further complicated matters, necessitating government intervention through subsidies.
To address these challenges, researchers have proposed a micro-model approach to estimate household welfare and consumer surplus in response to changing electricity prices. This model also calculates the deadweight loss associated with subsidies. By utilizing data from the Pakistan Social and Living Measurement Survey (PSLM) and NEPRA, policymakers can gain valuable insights for reform. Ultimately, the goal is to design a more targeted and equitable framework for subsidizing different consumer categories, ensuring that subsidies reach those who need them the most.
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Electricity tariff reduction plans
The Pakistani government has recently taken steps to reduce electricity tariffs, cutting rates by Rs7.41 per unit for residential consumers and Rs7.59 per unit for commercial users. This move is aimed at providing relief to citizens struggling with high inflation and stimulating industrial activity. The government has also made Rs6 of the Rs7.41 reduction permanent.
The reduction in electricity tariffs is a result of strategic reforms and negotiations with the International Monetary Fund (IMF), which provided a bailout of $7 billion to stabilise the country's finances. The decrease in global oil prices has also contributed to the government's ability to cut tariffs, saving approximately Rs168 billion.
In addition to these measures, the government has ended power purchase contracts with several independent power producers, including Pakistan's largest utility company, to cut costs and lower electricity tariffs. These terminations will save the nation nearly Rs411 billion ($1.48 billion) in the coming years.
The government has also addressed the issue of circular debt, amounting to Rs2,393 billion, which has long hindered the energy sector's stability. Furthermore, the return on equity (ROE) for government-owned power plants has been reduced to 13%, fixed at an exchange rate of Rs168.
The Prime Minister, Shehbaz Sharif, has emphasised the need for continued reforms in the power sector and the importance of enhancing efficiency by privatising or provincialising power distribution companies (DISCOs). These tariff reduction plans are expected to alleviate financial pressure on households and businesses, while also promoting economic growth and industrial competitiveness in Pakistan.
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Frequently asked questions
The base tariff of electricity for domestic consumers in Pakistan was PKR 48.84 per unit. The electricity price for small businesses was 94.55% of the price paid by big businesses.
Households with low electricity consumption pay 27.77% of the price paid by households with high electricity consumption.
The electricity price for businesses in Pakistan is PKR 43.860 per kWh or USD 0.154.
The residential electricity price in Pakistan is PKR 19.190 per kWh or USD 0.067.
