Industry outrage over Govt. ‘celebration’ of new power sector loan

ISLAMABAD: The country’s industry has strongly criticized the government for celebrating the continuation of the Debt Service Surcharge (DSS) of Rs 3.23 per kWh for the next six years. The surcharge will be used to repay a Rs 1.225 trillion loan being raised from 18 banks to address the circular debt crisis.
The issue was discussed during a public hearing organized by the National Electric Power Regulatory Authority (NEPRA) to gather feedback from stakeholders on a proposed positive adjustment of Rs 0.1911 per kWh under the Fuel Cost Adjustment (FCA) mechanism for August 2025. NEPRA Chairman Waseem Mukhtar presided over the hearing.indu
The CEO of CPPA-G, Rihan Akhtar, informed participants that the negative adjustment of Rs 1.79 per kWh for September 2025 would end, while the positive adjustment of Rs 0.1911 per kWh would be applied. As a result, the net impact on consumers of both DISCOs and K-Electric will be an increase of Rs 1.98 per kWh, which will be reflected in electricity bills in October 2025.
This adjustment will translate into an additional burden of over Rs 27 billion on consumers, mainly due to technical constraints in the transmission system. Another reason cited for the positive FCA was a reduction in hydropower generation and the increased use of imported fuel in power plants in Central Punjab.
NEPRA Member (Technical), Rafique Ahmad Shaikh, questioned the justification for passing system inefficiencies on to consumers.
“Why should consumers pay the price for inefficiencies in the system?” he asked.
He also expressed frustration with a representative of M/s Zong for asking irrelevant questions during the hearing.
Rehan Javed from Karachi questioned whether the DSS rate of Rs 3.23 per kWh would increase further if the circular debt stock continues to rise. He stressed that since the DSS is a non-tariff charge, its continuation over the next five years is not justified.
“We are very disappointed at the celebration of new loans to be repaid through DSS, which is being unfairly imposed on consumers. Is there any justification for such celebrations?” he said.
While CEO CPPA-G Rihan Akhtar declined to comment on the celebrations reportedly held at the Prime Minister’s Office, he explained that the new loan is being secured at KIBOR minus 19 basis points, with a floor rate. He added that if KIBOR rises above 14%, no payments will be made to banks, and the delta would be absorbed by the banks.
NEPRA Member (Development), Maqsood Anwar Khan, observed that despite adjustments, DSS appears likely to continue for the foreseeable future.
Aamir Sheikh from Lahore noted that the FCA for July was negative Rs 1.79/unit, while the FCA for August is positive Rs 0.19/unit. This results in a net increase of around Rs 2/unit, representing a 5% rise in electricity rates.
He said electricity tariffs had already risen by 10% since June, with current rates at around 11 cents/unit, and will now go up another 5%, despite a previous government commitment of 9 cents/unit (Rs 25/unit) for industrial consumers.
“De-industrialisation will not stop if this surge continues,” he warned.
He also pointed out that the 18% sales tax being charged on the DSS (around Rs 0.60/kWh) should be used to reduce the circular debt.
“Since the GST on DSS is being paid by consumers, it should be diverted to help reduce the debt,” he argued.
Rihan Akhtar noted the suggestion and said it would be considered.
Aamir Sheikh also said that industry representatives criticized the lack of transparency in how K-Electric’s FCA is being handled. One noted:
“Industry was hoping for a negative FCA since KE’s FCA usually favors consumers. However, no calculation was presented during the NEPRA hearing to show how much KE’s FCA was for August, or whether it has been passed on to all consumers.”
Tanveer Barry, representing the Karachi Chamber of Commerce, said the country still relies on imported fuel for 23% of power generation, while only 4.3% comes from renewables—leading to higher FCA costs. He noted that Karachi’s FCA for May and June is still pending and questioned why NEPRA has not passed on the benefits to Karachi-based consumers.
He also criticized the Rs 1.225 trillion loan arrangement, reportedly under Islamic finance, asking:
“Is it really Islamic if honest consumers are forced to pay DSS at Rs 3.23/kWh for the next six years?”
Barry warned that with the government planning to increase generation capacity to 64,000 MW, capacity charges will rise, leaving little hope for a reduction in electricity tariffs.
Arif Bilwani, supporting his fellow businessmen, raised the issue of the railway line for the Lucky Power Plant, which operates on imported coal.
In response, CEO CPPA-G acknowledged delays in mega projects in Pakistan and explained that Lucky Power Plant is using Korean coal. If Thar coal is supplied via rail, the cost would be roughly the same. However, he clarified that this does not mean the railway line is unnecessary.
Ends