By December 2024, solar net-metering consumers had transferred a burden of Rs159 billion onto grid consumers who do not own solar panels. The estimated financial impact for FY2024-25 alone is approximately Rs223 billion, with the cumulative impact over FY2024-25 to FY 2033-34 estimated at around Rs4.36 trillion if the framework is left unamended.
Eighty per cent of net-metering consumers are concentrated in nine major cities, mostly in affluent areas. The boom did not need much explanation. Installed net-metered capacity grew from 321MW in 2021 to roughly 7,193MW by December 2025. The country imported close to 17GW of solar panels in 2024 alone, twice the volume of the year before, and roughly 45GW over roughly five years, near the entire installed capacity of the national grid.
This is being called Pakistan’s bottom-up solar revolution. Without attaching any value judgment, it is more accurately an erosion of the grid’s fixed-cost recovery base, including its cross-subsidy component, driven by declining grid sales. Customers who can afford rooftop systems have not walked away from the grid. Most remain connected and continue to draw on it for nighttime supply, seasonal shortfalls, backup, balancing and surplus exports.
What has changed is the volume of electricity they buy. Their net grid purchases have fallen sharply, and with them their contribution to the fixed costs that hold the system up. The customers who could not install solar are now absorbing the capacity charges on idle thermal plants that those richer customers used to subsidise.
Annual capacity payments for FY2024-25 stood at approximately Rs1.81 trillion, against an installed capacity of around 36,397MW and a peak demand of around 25,000MW. More than a third of the system sits idle while the bill for it continues to rise. The government of Pakistan terminated five IPP contracts effective 1 October 2024, including HUB Power, Lalpir, Pakgen, Rousch, Saba and Atlas.
The reforms extend beyond terminations: the rationalisation of fixed operations and maintenance costs, the restructuring of dollar-based indexation, the revision of insurance components,and the adjustment of other contractual charges have all been part of the package. The scale of what is still under contract has not yet caught up with the scale of what has been renegotiated.
Set against this, the policy whiplash on solar makes more sense than it should. The FY2025-26 budget proposed an 18 per cent general sales tax on imported solar panels. After parliamentary pressure, including from the government’s own coalition partners, the rate was reduced to 10 per cent, effective July 1, 2025. Pakistan’s IMF arrangement carried a quiet contingency: if revenue targets fell short in the first half of FY2025-26, the rate would climb back to 18 per cent from January 2026. The trigger did not fire, and the FY2026-27 budget dropped the proposal, but the mechanism sat in writing for nearly a year.
In March 2025, the ECC cut the net-metering buyback rate from a National Average Power Purchase Price of around Rs27 per unit to a flat Rs10 per unit. In February 2026, Nepra went further, replacing net metering with net billing under the Prosumer Regulations 2026, dropping the buyback rate for new connections to Rs8.13 per unit and reducing contract length from seven years to five. The grid retail tariff for the same domestic customers sits at roughly Rs45 per unit off-peak and Rs60 per unit at peak, subject to taxes and periodic adjustments.
Another policy is pulling the opposite way. The Off-the-Grid (Captive Power Plants) Levy Act 2025 is an IMF structural benchmark designed to push industry off captive gas generation and back onto the grid. The rate began at 5.0 per cent in February 2025, rose to 10 per cent in July 2025, reached 15 per cent in February 2026, and is scheduled for 20 per cent in August 2026. It has had demonstrable success.
The IMF rejected the Petroleum Division’s request to freeze the levy at 15 per cent. Its position is that the rate must climb until industrial grid demand stops falling. If demand falls faster, the levy goes higher and arrives sooner. Captive gas use in the export sector has already collapsed from 180 mmcfd to 26 mmcfd. The Sui Company’s losses crossed Rs104 billion in the first half of FY2025-26.
The contradiction is now in plain sight. One IMF benchmark pushes the industry onto the grid to defend its revenue base. Another policy lever, the punitive net-billing regime, treats rooftop solar as a threat to that same revenue base, while a tax on the panels themselves ranges from 10 to 18 per cent, depending on which budget round is being defended that quarter. The state cannot decide whether the green energy transition is a national commitment under the country’s NDC, with a 60 per cent renewables target by 2030, or whether it is a fiscal threat to be levied into containment.
There is a coherent policy available – a net-billing regime that is cost-reflective, socially balanced and responsive to the value that exported electricity provides to the grid, regardless of consumer category. And a published, time-bound exit from take-or-pay IPP contracts as well as a capacity payment reform tied to actual dispatch rather than nameplate.
Until those three sit in the same document, declining grid sales will continue to shift a growing share of fixed system costs towards the consumers who remain most dependent on grid electricity, and they are not the ones who can afford it the most.
The writer is a partner at Tabadlab and runs their climate portfolio. He can be reached at: [email protected]
