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NEPRA Reviews Rs22.98/Unit Industrial Electricity Incentive as Generation Costs Rise
By Mariam Khan
Real Estate Analyst
3 min read
The National Electric Power Regulatory Authority (NEPRA) has held a hearing on the government's incremental electricity-consumption package for industrial and agricultural users. The scheme currently offers incremental electricity at Rs22.98 per kWh, but the Power Division says average marginal generation costs have risen above that level, reaching a weighted average of Rs27.58 per kWh for December to May and considerably higher in some individual months.
Why a Rs4.60 Gap Is the Core Issue
The difference between the Rs27.58 weighted marginal cost and the Rs22.98 offer is Rs4.60 per kWh, or about 20 percent of the offered rate (our own calculation). If the Power Division's figures hold, each additional unit sold under the package for December to May would be supplied below its marginal generation cost. The report does not say who would bear the difference or what change the Power Division is seeking, and NEPRA's decision on the package has not been reported.
Why Some Months Are Worse Than the Average
The Power Division says marginal costs are "considerably higher" in some individual months than the weighted average of Rs27.58. A package priced at a flat rate would therefore be furthest from cost in those months. Monthly figures were not given in the report, so we cannot say which months are affected.
Why This Matters for Construction-Material Industries
Cement, steel, ceramics and other construction-material makers are heavy electricity users, and an incentive for incremental consumption is meant to encourage them to use more grid power at a lower rate. If the rate is revised upwards, or the package is narrowed, the benefit to these industries would shrink. That would matter to developers only indirectly, through material costs, and the effect would be uncertain. It also comes as generation costs are already under pressure, which we covered in DISCOs seeking a further Rs1.7267 per unit adjustment for October.
Why It Connects to Wider Grid Reform
The package sits alongside other attempts to improve grid use and pricing, such as the first 400MW wheeling auction. How regulators price extra consumption, and who pays when costs exceed the rate, are questions that recur across these policies.
What This Means for Industry, Developers and Buyers
Industrial users counting on the Rs22.98 rate should treat it as under review until NEPRA issues its decision. Developers and contractors should not build lower electricity-driven material prices into budgets yet. The signals to watch are NEPRA's ruling on the package, any revised rate, and whether the Power Division's marginal-cost figures are adopted. Decisions are published by NEPRA and the Power Division.