Pakistan facing nearly triple the power costs as compared to China, India, US: report

Industrialists in Pakistan face higher electricity prices than their counterparts in the United States, European Union, China, and India. This is detrimentally affecting the competitiveness of Pakistani exporters in international markets. 

The ‘Electricity 2025 — Analysis & Forecast to 2027’ report from the International Energy Agency (IEA) has revealed that the ‘energy-intensive industries’ in Pakistan had to bear an average electricity price of 13.5 cents per Kilowatt-hour (unit) in 2024.

In contrast, average electricity prices in Norway remained low at 4.7 cents, while prices in India and the USA hovered around 6.3 cents per unit. China and the European Union have to face slightly higher power prices at 7.7 cents per unit and 11.5 cents per unit, respectively.

Comparing Pakistan with neighbouring India, Pakistani industrialists are at a significant disadvantage as they face average electricity prices that are 187 percent higher. Since businesses have to pass on these input costs to their consumers, Pakistani goods are frequently neglected because of the higher price tag they come with.

Moreover, frequent power cuts and the unreliability of the national grid often cause significant delays in production processes, making it tough for domestic industries to meet export orders in a timely manner.

According to the IEA’s report, hikes in the price of electricity hamper industrial growth and reduce export volumes. This spells bad news for cash-strapped Pakistan, which has historically run large trade deficits against other countries.

Given the EU’s high electricity costs, the report outlined how many business owners were relocating industrial operations off of European shores to benefit from cheaper electricity costs. However, it is unlikely that any industrialists considered setting up shop in Pakistan owing to the sky-high average electricity prices.

As such, higher industrial electricity costs have effectively locked out a significant inflow of foreign direct investments (FDI). India might be an attractive destination for European industrialists as they stand to save over 144 percent on their electricity bills by relocating to the South Asian country.

According to reports, domestic electricity power costs have surged by a colossal 155 percent since 2021 because of the government introducing extortionate hikes in electricity tariffs.

Islamabad started levying the aforementioned taxes to help it secure the Extended Fund Facility (EFF) loan from the International Monetary Fund (IMF). Over the years, however, it has detrimentally affected many industries, especially Pakistan’s breadwinner industry: Textiles.

The textile industry brings in over 50 percent of its export revenues for Pakistan and consumes a large amount of electricity. With Pakistani industrialists facing electricity prices almost three times as high as their competitors, many question whether Pakistan can grow export revenues without the government cutting power prices.