Latest news with #Rs24.75
Business Recorder
24-05-2025
- Business
- Business Recorder
Power in decline
EDITORIAL: Just as the government prepares to repackage power sector subsidies in a new structure discussed with the World Bank, its own projections for future electricity costs have triggered alarm across the industrial landscape. The textile sector, already battered by erratic supply and steep bills, is warning of a retreat back to captive generation – an outcome that exposes the widening gap between policy claims and operational reality. At the heart of the dispute lies the Power Division's submission to Nepra of power purchase price (PPP) projections for FY2025-26. Despite years of renegotiations with Independent Power Producers (IPPs) and claims of trillions saved, the projected tariffs for next year remain strikingly similar to the old ones. In scenario after scenario presented by the Central Power Purchasing Agency (CPPA-G), the cost of power hovers between Rs24.75 and Rs26.70 per unit. Not only do these projections fail to reflect any tangible benefit from reforms, they also disregard the lived experience of industrial users grappling with frequent supply disruptions and declining competitiveness. From Karachi to Lahore, the industrial sector is demanding clarity: where are the savings, and why are they not translating into reduced tariffs? The fact that power rates may actually rise by Rs5-6 per unit in July, as time-bound fuel and quarterly adjustments expire, only deepens the frustration. Already, grid power has become synonymous with unreliability, causing production losses of up to 10 percent compared to captive generation. If prices rise further, many manufacturers see little choice but to revert to their own plants – despite the inefficiencies – just to keep operations stable. Nepra's hearing last week laid bare the disconnect between official optimism and industrial reality. Industry representatives criticised the flawed assumptions underpinning the CPPA's scenarios: overestimated GDP growth, inflation pegged at 8.65 percent despite a clear downward trend, and Kibor set at 11.9 percent even as interest rates are expected to fall into single digits. They also pointed to the absence of any discernible impact from IPP renegotiations, especially with the expensive Jamshoro coal plant and other legacy capacity charges still weighing heavily on the system. Meanwhile, the new subsidy restructuring proposal is being sold as progressive and targeted—but details reveal more of the same. Instead of genuine cost rationalisation or structural reform, the plan reshuffles consumer categories and discounts under a new label, seeking to placate lenders rather than fix the sector's fundamentals. For large-scale industry, the implications are dire. A distorted pricing structure, unreformed distribution companies (Discos), and unreliable supply chains are combining to undermine export potential at a time when Pakistan can least afford it. The sharpest warning came from the textile sector, which signalled that if quality and pricing are not addressed, it will abandon the grid altogether. Such a shift would not just undo years of policy work but also widen the inefficiency loop: as more high-volume users exit the system, the cost burden will shift further onto a shrinking base, deepening the circular debt crisis and exposing the sector to yet more political patchwork. Nepra's call for more realistic planning and transparency is timely, but insufficient. The Power Division's defence that projections are based on assumptions from IFIs and government agencies only underscores how deeply these exercises have lost touch with economic reality. What industry is demanding is not perfect foresight, but coherence and accountability. That these remain elusive after decades of reform is telling. With consumption already falling and energy affordability now front and centre in export decisions, the warning signs are flashing red. Policymakers may have convinced external lenders of their good intentions, but they are rapidly losing the confidence of the very users who keep the system afloat. Unless corrected, these flawed assumptions and misplaced priorities will not just cripple industry – they will power Pakistan straight into stagnation. Copyright Business Recorder, 2025
Express Tribune
16-05-2025
- Business
- Express Tribune
NEPRA flags power woes for industry
Listen to article The National Electric Power Regulatory Authority (Nepra) has directed the Power Division to address the concerns of the industrial sector regarding inconsistent power supply. Industries are reportedly considering a return to captive power plants (CPPs) despite their higher operational costs due to frequent grid supply disruptions. The directive was issued during a public hearing on a petition filed by the Central Power Purchasing Agency-Guarantee (CPPA-G) concerning the assumptions used to project the power purchase price (PPP) for financial year 2025-26. The hearing was chaired by Nepra Chairman Waseem Mukhtar and attended by Member (Technical) Sindh Rafique Ahmad Shaikh, Member (Technical) K-P Maqsood Anwar Khan and Member (Law) Amina Ahmed. CPPA-G presented seven scenarios for the proposed PPP. In scenario one, it projected the price at Rs24.75 per unit, scenario two – Rs26.04 per unit, scenario three – Rs25.88 per unit, scenario four – Rs26.33 per unit, scenario five – Rs26.70 per unit, scenario six – Rs26.55 per unit and scenario seven – Rs26.22 per unit. Replying to a question, CPPA-G representative Naveed Qaiser said that scenarios four and five were likely to be implemented next year. However, those projections were challenged by several interveners, who argued that the estimates did not adequately reflect the expected decline in hydropower generation. They also criticised the assumed exchange rate of Rs290/$, which was likely to influence future electricity pricing. During the hearing, it was revealed that the PPP could drop by 78 paisa to Rs2.25 per unit, potentially saving consumers Rs140 billion to Rs400 billion in the next fiscal year. The average purchase price is expected to range between Rs24.75 and Rs26.22 per unit compared to the current average of Rs27 per unit. Authorities projected a possible Rs2-per-unit reduction in tariffs alongside a 2.8% to 5% increase in demand, assuming an exchange rate of Rs300/$ in FY 2025-26. The case officer explained that due to varying demand and fuel price assumptions, average per-unit prices in different scenarios could range between Rs6.8 and Rs8.1. Total fuel costs might reach Rs1.28 trillion, influenced by exchange rate fluctuations, inflation and interest rates. Some scenarios also predict a 24% reduction in electricity prices compared to the current year. Transmission losses for National Transmission and Despatch Company (NTDC) are expected to remain stable at 2.80%. Nepra questioned the Ministry of Energy's optimistic demand projections, especially given the recent downward trends. In response, ministry officials argued that demand was expected to rebound in line with the projected GDP growth. They noted that electricity demand rose 28% in April, attributing the uptick to recent tariff reductions that encouraged industries to reconnect to the grid. The projections of CPPA-G were challenged by the interveners, who stated that PPP projections for FY26 were not correct, as a reduction in hydel generation was imminent. The budget for FY26 is projected to be prepared at an exchange rate of Rs290 per dollar. During the hearing, it was revealed that the PPP was estimated to decrease by 78 paisa to Rs2.25 per unit, which could provide relief worth Rs140 billion to Rs400 billion to electricity consumers in the next fiscal year. According to officials, the estimated PPP for the upcoming fiscal year will range between Rs24.75 and Rs26.22 per unit, compared to Rs27 per unit for the current fiscal year. Authorities also estimated a Rs2-per-unit reduction in electricity prices and a 2.8% to 5% increase in demand. The US dollar is projected to be valued at Rs300 in the next fiscal year. The case officer informed Nepra that the request pertained to PPP projections for the coming fiscal year. Different scenarios suggest a significant variation in electricity prices, with the average per-unit price likely to remain between Rs6.8 and Rs8.1. Due to potential increases in fuel costs, the total fuel cost could rise to Rs1,284.11 billion. Factors such as the dollar rate, inflation and interest rates impact electricity prices, which is why prices are expected to be higher in scenarios with low demand and high fuel costs. The briefing revealed that compared to the current fiscal year, some scenarios could result in a 24% decrease in electricity prices, while transmission losses for NTDC are expected to remain at 2.80%. Nepra questioned the Ministry of Energy's claims regarding increased electricity demand. The authority's chairman asked how an increase was expected when demand had been declining in recent years. The Ministry of Energy responded that demand was expected to rise based on GDP growth and recent reductions in electricity prices had already led to an increase in demand. In April, electricity demand increased by 28% and industries have started returning to the grid. If tariffs remain low, electricity demand will increase. The Ministry of Energy also briefed Nepra on fuel price projections for the next fiscal year. Officials stated that the cost of gas for electricity generation was estimated at Rs1,050 per mmBtu. Thar coal is projected to cost $20 per ton from July to September and $18 to $19 per ton from October to June. Imported coal (API 4) is estimated to remain at $100 per ton throughout the year, imported coal (ICI 3) at $74 per ton and imported coal (ICI 5) at $35 per ton. Brent crude oil is expected to be priced at $74 per barrel until January 2026 and $72 per barrel from March to June 2026. According to the Nepra briefing, furnace oil is estimated to cost $522 per ton from July to December and $508 per ton from January to June. The price of high-speed diesel is expected to remain at Rs264 per litre throughout the year. The Ministry of Energy added that according to the IMF, the GDP was expected to grow by 3.6% in 2026 and electricity demand was projected to increase by 2.8% to 5%. Demand on the 132kv grid may reach between 128,000 million and 131,000 million units. Officials stated that electricity demand dropped significantly in 2023, improved somewhat in 2024 and was expected to grow steadily in the coming years.
Business Recorder
09-05-2025
- Business
- Business Recorder
Power sector: Base tariff relief likely
The Central Power Purchasing Agency (CPPA) has set the ground for the power base tariff adjustment for FY26, submitting the Power Purchase Price (PPP) projection in consultation with multiple agencies including the Power Division. The CPPA's PPP projection envisions seven different scenarios, with varying assumptions for demand, rupee dollar parity, fuel prices, and hydrology. The PPP deviation between the best case and worst-case scenario is Rs1.95/unit. The lowest PPP is set at Rs24.75/unit for FY26 – which is Rs0.29/unit lower than the lowest PPP envisioned in the previous rebasing exercise of FY25. The PPP allowed for FY25 was Rs27/unit, with an absolute amount of Rs3.5 trillion. What looks increasingly likely is that the final PPP for FY26 will be lower year-on-year – regardless of which scenario is used as best case. The year-on-year savings in case of most likely adoption of Scenario 2 – which envisions are close to Rs0.96/unit – which may not sound massive but is a relief, especially considering this will be the first time in many years when year-on-year change in PPP is negative. For context, Pakistan's electricity PPP had doubled in last five years, despite significant improvement in fuel generation mix. A large part of it is due to savings to the tune of Rs100 billion resulting from renegotiated IPP contracts. The bar for demand has been set low – and understandably so, given the rather dismal rate of demand revival in the past two years. Even the 'high' demand scenario envisions power sales going up only 5 percent, that too, from a multiyear low 12-month demand from January to December 2024. The 'normal' demand growth scenario sees it growing 3 percent – which sounds just about right, given the ground reality, on both domestic and industrial fronts, and with the solar boom in full swing. What is concerning is the rather steep fall in power demand, which for FY26 is likely to be set at the lowest in five years. It remains to be seen what room does the government have in lieu of subsidies, once the final revenue requirement is approved – after induction of prior year adjustment and distribution margin. The fate of Rs1.71/unit subsidy that is scheduled to expire in June 2025, will determine the extent of base tariff relief for FY26. While the exchange rate and international commodity fuel prices have stayed stable, the biggest concern for upcoming fiscal year could be a sharp drop in electricity generation from hydel sources. Low hydrology could take the PPP close to Rs27/unit – wiping out any potential gains from the IPP negotiations. It remains to be seen, how the authorities treat hydel generation assumptions – especially in light of recent geopolitical events. Even without the one-sided abeyance of Indus Water Treaty, experts had been raising concerns over low hydrology going forward. In all likelihood, low hydrology will lead to higher periodic and monthly adjustments, even if base tariff does not account for the same.
