Industries Slam ‘Cosmetic Reforms’ as Circular Debt Pressures Mount

Industrial consumers have rejected the government’s claims of reducing electricity tariffs and controlling the power sector’s circular debt through revised agreements with independent power producers (IPPs), as capacity payments have once again surged, adding fresh pressure on consumers. The National Electric Power Regulatory Authority (NEPRA) on Thursday reserved its decision on a petition filed by power distribution companies (Discos) seeking permission to recover Rs. 8.4 billion from consumers for the first quarter of FY2025-26 (July–September). The public hearing turned contentious, with industrial representatives accusing the government of introducing “cosmetic reforms” while the power sector’s financial crisis deepens. During FY2024-25, capacity payments had dropped notably, by Rs. 47.1 billion in the third quarter (January–March) and Rs. 53.7 billion in the fourth (April–June) — following the government’s termination of several costly power purchase agreements with IPPs. However, the latest petition indicates that these payments have climbed again. According to the data submitted, Discos are seeking Rs. 21.7 billion in capacity charges, offset by negative adjustments worth Rs. 13.3 billion from lower system losses and operational savings. Among the companies, Lahore Electric Supply Company (Lesco) reported the highest capacity charge at Rs. 8.45 billion, followed by Multan Electric Power Company (Mepco) at Rs. 4.35 billion, Gujranwala Electric Power Company (Gepco) at Rs. 4.23 billion, and Faisalabad Electric Supply Company (Fesco) at Rs. 2.34 billion. Hyderabad Electric Supply Company (Hesco) recorded the largest negative adjustment of Rs. 3.21 billion. Consumption patterns also varied across companies. Fesco’s overall demand grew 6.8 percent, driven by a 28 percent surge in industrial consumption, while Gepco saw an 11 percent rise in industrial and 3 percent in commercial usage. Hesco’s demand increased by 4.5 percent and Lesco’s by 4.4 percent. In contrast, Mepco’s consumption declined by 5.3 percent, and Quetta Electric Supply Company (Qesco) also posted a fall. “Industry cannot survive like this, decisions made in Islamabad’s air-conditioned rooms don’t work in factories,” said one frustrated industrial consumer during the hearing. Another participant, Tanveer Bari, urged NEPRA to reject the tariff hike, saying the resurgence of capacity payments proved that “nothing has really changed” despite the government’s renegotiated IPP contracts. From Karachi, Rehan Jawed criticized the government’s incremental power package as “ineffective,” arguing that the offered rate of Rs. 22.90 per unit should be slashed to Rs. 16 to encourage industrial growth. He also pointed out that industries are burdened with a Rs. 160 billion cross-subsidy supporting other consumer categories. NEPRA Member (Technical) Rafiq Shaikh warned that the circular debt crisis would persist unless losses and poor recoveries were addressed. He also expressed displeasure over the Power Division’s absence from the hearing, directing that a letter of censure be issued. The regulator said it will announce its final decision after reviewing the detailed data submitted by the Discos.