ISLAMABAD: The steel industry, one of the country’s most electricity-intensive manufacturing sectors, has suffered estimated losses of nearly Rs150 billion as the government’s incremental power subsidy for Karachi-based industries remains frozen, despite official confirmation that funding constraints were never the cause of the delay.
The Pakistan Association of Large Steel Producers (PALSP), in a letter dated February 9, 2026, urged the Ministry of Finance to resolve the issue on an urgent basis. The letter, addressed to Secretary Finance Imdad Ullah Bosal, highlights the mounting financial distress of the steel industry and warns of serious economic consequences if the subsidy impasse continues.
Copies of the letter were also sent to the secretary to the prime minister; secretary to the president; chief minister of Sindh, minister for power, special assistant to the prime minister for industries; national coordinator of the SIFC; chairperson of the National Electric Power Regulatory Authority (Nepra); and the Senate Standing Committee on Finance.
Industry representatives say the prolonged non-release of the subsidy has pushed several steel manufacturers to the brink, significantly weakening their ability to compete with producers in other parts of the country where electricity costs are substantially lower.
The issue came into sharp focus during a meeting of the Senate Standing Committee on Finance on February 26, 2025, when Additional Secretary Finance Qumar Sarwar Abbasi stated on record that there had been no delay on the part of the government or the Ministry of Finance in releasing subsidy payments to K-Electric. His statement directly contradicted earlier claims by officials of the Power Division, who had attributed the delay to non-release of funds by the government.
Despite this clarification, Karachi’s industrial sector, particularly the long steel industry, has yet to receive any meaningful relief. Although KE has challenged certain incremental power orders in the Islamabad High Court, industry sources point out that the disputed amount constitutes less than 17 per cent of the total payable subsidy. The remaining portion is undisputed and legally independent of the court proceedings, making its continued withholding increasingly contentious.
Compounding industry concerns, subsidy figures have already been reconciled by Nepra and the Ministry of Energy (Power Division) under the supervision of the Special Investment Facilitation Council (SIFC). However, no concrete steps have been taken to release the undisputed subsidy amount to eligible industries.
The impact has been most severe on the steel sector, where electricity represents the second-largest cost of production after raw materials. Prolonged exposure to high power tariffs has forced manufacturers to absorb heavy losses, defer expansion plans, and operate below capacity. Industry insiders warn that continued delays could lead to plant shutdowns, job losses, and a further decline in domestic steel output.
Manufacturers also argue that the impasse amounts to effective discrimination against Karachi-based industry, undermining government efforts to revive large-scale manufacturing and boost exports.
Industry stakeholders are now calling for the immediate approval and release of the undisputed portion of the incremental power subsidy, warning that further delays will deepen financial losses and damage investor confidence in the country’s largest industrial hub.They stress that timely intervention could still prevent long-term structural damage to the steel sector.
