Can Pakistan Scale Up Affordable Energy Availability to Achieve Prosperity?

by Riaz Haq

yesterday

Pakistan is currently classified as a lower middle-income country, with the ambition to become a high-income country. Its policymakers now recognize that no country has transitioned from middle-income to high-income status without generating substantial electricity at affordable rates. The link between energy and prosperity has been well-established since the advent of the Industrial Revolution. The AI Revolution has further reinforced it. Can Pakistan make the transition to a high-income country by developing indigenous energy resources to minimize dependence on expensive imports amid geopolitical uncertainty? 

Pakistan Developing Indigenous Energy Sources


All high-income countries are high-energy countries. Empirical data from the Energy for Growth Hub confirms that high-income, low-energy nations do not exist. A strong positive correlation (R² ≈ 0.83) ties per capita income and electricity consumption globally, meaning economic development requires scaling up energy availability. 

Electricity-Income Correlation. Source: ToddMoss Substack

Recognizing the importance of scaling up electricity generation, Pakistan is undergoing a major transformation in its power sector. Driven by the need to combat a volatile import bill and stabilize its finances, the nation is aggressively shifting away from expensive imported fuels toward a mix grounded in clean energy (solar, hydro, nuclear and wind) and domestic coal. 
Currently, about one-half of the installed base consists of clean and low-carbon sources while the other half relies on fossil fuels. The actual power generation relies more heavily on clean sources. For example, hydropower contributes 36.6% of total generation, while coal generates 26.3% overall, split between local Thar coal and imported coal. Nuclear adds14.3% of the output and  solar and wind account for approximately 4.3% on-grid, though private behind-the-meter installations have surged exponentially in recent years.
To reduce dependence on fossil fuel imports, Pakistan is tapping into the massive lignite coal reserves in the Thar Desert. Projects operating in Block I and Block II utilize domestic mining to provide reliable baseload power without draining foreign exchange reserves.
Major hydropower facilities like the Tarbela 5th Extension and ongoing mega-projects like Dasu and Diamer-Bhasha are expanding generation potential past 11,600+ MW. The Karachi Nuclear Power Plant (KANUPP K-2 and K-3) reactors supply crucial emissions-free base-load power to the southern grid network. Prompted by steep tariff hikes, private rooftop solar installations continue to surge across the industrial, agricultural and household sectors.
Pakistan has no choice but to make electricity cheap and plentiful to increase the productivity of its people. It is the best way for it to transition from a lower middle-income country to a high-income country. 

  • Riaz Haq

    The effective electricity rate in Pakistan ranges from approximately PKR 22 to over PKR 60 per kWh (unit)for residential consumers, depending on consumption slabs, while business rates average around PKR 39.68 per kWh. Total effective costs can approach or exceed once all baseline charges, monthly adjustments, and taxes are combined. [1, 2, 3, 4]
    Breakdown of Tariff Structure and Slabs (2026)
    • Protected Domestic Consumers (≤200 units/month):
      • Tier 1 (1–100 units): PKR 10.54 per unit
      • Tier 2 (101–200 units): PKR 13.01 per unit
      • Note: Lifeline and protected users are largely shielded from base tariff and fuel cost hikes. [1, 2]
    • Non-Protected Domestic Consumers (>200 units/month):
      • Rates range from PKR 22.44 to PKR 48.84 per unit (and higher upper slabs climbing up to PKR 42.76–60 per unit as you cross higher consumption brackets and add cooling/peak loads).
      • Slabs are non-telescopic: crossing a threshold (such as moving from 300 to 301 units) applies the higher rate to the entire volume of consumed units. [1, 2, 3, 4]
    • Commercial and Industrial Rates:
      • Business and commercial retail rates average roughly PKR 39.68 per kWh or higher depending on peak hours and demand charges. [1]
    Taxes, Surcharges, and Adjustments Added to Bills
    Electricity bills in Pakistan incorporate multiple statutory levies and variable pass-through mechanisms:
    • General Sales Tax (GST): 18% applied to the cumulative energy charges and duties. [1]
    • Electricity Duty: A provincial tax of 1% to 1.5% on variable charges. [1, 2]
    • Fuel Charges Adjustment (FCA): A monthly floating adjustment reflecting the variance between actual generation fuel costs and reference fuel costs (e.g., ranging from roughly PKR 0.75 to over PKR 2.05+ per unit depending on the month). [1]
    • Quarterly Tariff Adjustment (QTA): Periodic capacity and system cost trues-ups spread across quarters (e.g., PKR 0.5194 per unit). [1]
    • Financing Cost (FC) Surcharge: Fixed at PKR 0.43 per kWh (plus other FC surcharges). [1, 2]
    • TV Fee: A flat monthly fee of PKR 35 for domestic users (PKR 60 for commercial). [1, 2]
    • Income Tax / Advance Tax: 7.5% for residential consumers not listed on the FBR Active Taxpayers List once monthly bills reach PKR 25,000 or higher (with varying percentage tiers for commercial/industrial non-filers). [1, 2]
    • Fixed Charges: Imposed monthly based on the sanctioned load or tier category, independent of actual consumption units. [1, 2]

    15 hours ago