Pakistan’s industrial sector is bearing the brunt of exorbitant electricity prices, paying almost double compared to China, India, and the United States. Even the European Union, known for its relatively higher energy costs, has lower electricity tariffs than Pakistan. The recent report, Electricity 2025 — Analysis & Forecast to 2027, published by the Paris-based International Energy Agency (IEA), presents a grim picture of Pakistan’s energy pricing structure and its devastating impact on industrial competitiveness. The report states that in 2024, the average electricity rates stood at 6.3 cents per kilowatt-hour (kWh) in both the United States and India, 7.7 cents in China, 4.7 cents in Norway, and 11.5 cents in the European Union. In stark contrast, the average electricity prices for energy-intensive industries in Pakistan hovered around 13.5 cents per unit, making it one of the most expensive countries for industrial power consumption.
Pakistan’s energy crisis is deeply rooted in years of mismanagement, corruption, and inefficiencies within the power sector. A major contributor to this issue is the outsourcing of electricity generation to Independent Power Producers (IPPs), which has led to skyrocketing production costs. The contracts signed with these IPPs are heavily skewed in their favor, guaranteeing them payments regardless of actual electricity consumption. These agreements have placed an unbearable burden on the national exchequer and, ultimately, on consumers.
Line losses, power theft, and outdated transmission infrastructure further compound the problem. The country loses approximately 18 to 20 percent of its generated electricity due to technical and non-technical inefficiencies. These losses, instead of being controlled, are passed on to consumers through higher tariffs. Over the years, successive governments have failed to implement reforms that could modernize the transmission system and reduce theft, leading to a continuous cycle of losses and rising electricity prices.
The effects of high electricity prices are felt across all sectors, but the industrial sector has been hit the hardest. Pakistan’s exports have already been struggling due to global economic conditions and domestic policy missteps, but exorbitant electricity rates have made it increasingly difficult for local industries to compete with regional counterparts. The textile sector, which constitutes more than 60 percent of Pakistan’s exports, is particularly vulnerable. Many textile manufacturers have either reduced their production capacity or shut down operations due to unsustainable energy costs. Countries like India and Bangladesh offer significantly lower electricity prices, allowing their industries to produce goods at a more competitive rate.
High electricity tariffs have also led to a sharp increase in the cost of production, making Pakistani goods expensive in international markets. As a result, exporters are losing orders to competitors, further exacerbating the trade deficit. With dwindling foreign exchange reserves, the inability to boost exports due to expensive electricity is proving to be a severe blow to the economy. The rising cost of doing business has discouraged investment, leading to factory closures and job losses. The manufacturing sector, which is a critical driver of employment, has seen thousands of layoffs due to unaffordable energy prices.
The hardships are not limited to industries alone. The common man in Pakistan is facing an unprecedented electricity crisis, with household power bills reaching unaffordable levels. The price of electricity for residential consumers has seen drastic hikes over the past year. From an average of 11 cents per unit in 2023, household electricity tariffs surged to over 15 cents per unit in 2024, creating immense financial pressure on ordinary citizens. Load shedding remains rampant despite the high costs, with many areas experiencing prolonged power outages due to fuel shortages and mismanagement. The combination of expensive electricity and frequent power cuts has made life increasingly difficult for millions of Pakistanis.
While global electricity prices fluctuate based on economic conditions and fuel supply chains, Pakistan’s situation is worsened by deep-rooted structural inefficiencies. In comparison, electricity prices in the United States and India have remained relatively stable at around 6.3 cents per kWh, while China’s tariffs stand at 7.7 cents per kWh. The European Union, despite its shift towards renewable energy, maintains an average industrial electricity rate of 11.5 cents per kWh. These figures indicate that Pakistan is paying significantly more for power, even when compared to economies that rely on high-cost renewable energy sources.
The impact of high electricity costs extends beyond the economic sector, affecting social stability as well. The rising cost of living, exacerbated by electricity price hikes, has led to increased public frustration. Protests against inflated electricity bills have become a common sight across major cities, with citizens demanding relief from excessive charges. Businesses, particularly small and medium enterprises, have been hit hard, with many forced to close operations due to unsustainable energy costs.
The government has attempted to address the crisis through subsidy programs, but these have proven to be unsustainable due to the country’s fiscal constraints. Instead of resolving the structural issues within the power sector, subsidies have only added to the mounting circular debt, which has now crossed a staggering PKR 2.6 trillion. The reliance on borrowing to pay off energy sector dues has pushed Pakistan further into financial turmoil, limiting its ability to invest in long-term energy solutions.
Past governments have also contributed to the current energy mess. The failure to invest in hydropower projects, reliance on expensive imported fuels, and inconsistent policies have all played a role in worsening the crisis. Although efforts have been made to diversify the energy mix by incorporating renewable sources, the pace of progress has been slow. The shift towards solar and wind energy, which could significantly reduce dependence on costly fossil fuels, has been hampered by bureaucratic red tape and lack of investment.
To overcome the crisis, Pakistan needs a comprehensive energy policy focused on reducing production costs, improving transmission efficiency, and renegotiating contracts with IPPs. The government must take decisive action to curb power theft and line losses, as these inefficiencies continue to drain the energy sector. Investment in hydropower and locally sourced renewables should be prioritized to reduce dependency on expensive imported fuels. Transparent governance and policy consistency are crucial for attracting foreign and domestic investment in the energy sector.
Pakistan’s current electricity pricing structure is unsustainable, and without immediate reforms, the crisis will continue to deepen. High tariffs are crippling industries, forcing businesses to shut down, and making life increasingly difficult for the average citizen. If drastic measures are not taken, Pakistan risks further economic deterioration, pushing the country into a deeper financial crisis. Addressing the electricity crisis should be a top priority for policymakers, as failing to do so will have long-term consequences for the nation’s economic and social stability.
The views expressed in this article are the author’s own and do not necessarily reflect Coverpage’s editorial stance.
