Pakistan's energy sector overhaul in 2025 combined tariff cuts and debt restructuring with sweeping new levies, transferring an estimated Rs2.9trn burden to electricity and fuel consumers through circular debt surcharges and petroleum and climate levies.
The year witnessed significant adjustments across the power and petroleum landscape. While the government reduced the stock of circular debt and lowered the base electricity tariff, it also imposed heavier taxes and fixed charges, reshaping the cost structure for households and industry alike.
At the centre of reforms was the effort to rein in circular debt. The power sector's liabilities were reduced by Rs780bn, bringing the stock down to Rs1.614trn from roughly Rs2.4trn in December 2024. In parallel, the government finalised Rs1.225trn in financing facility agreements, entering into a restructuring deal with a consortium of 18 banks under revised terms.
A critical feature of the management plan involved transferring a substantial share of distribution company inefficiencies and under-recoveries to electricity consumers. State-owned DISCOs accumulated Rs2.872trn in circular debt from FY2014-15 to September 2025, surpassing benchmarks approved by NEPRA.
Regulatory changes also included approval of a Rs34 per unit base tariff for FY2025-26, down Rs1.50 or 4.23% from the previous year's Rs35.50. Solar generation expanded sharply during 2025, rising to about 18,000MW from 4,124MW in December 2024. Net-metered capacity reached 6,000MW, while off-grid installations increased to 12,000MW.
On the fuels side, petroleum levies were raised substantially. The levy on petrol increased by Rs19.62 per litre to Rs79.62, while on high-speed diesel (HSD) it rose by Rs15.41 to Rs75.41 per litre. Kerosene oil saw a jump from Re0.5 to Rs18.95 per litre, and light diesel oil from zero to Rs15.34 per litre. A new Rs77 per litre levy was imposed on furnace oil.
The federal government collected a record Rs1,042.41bn in petroleum levy during the first nine months of calendar year 2025. A separate climate levy of Rs2.5 per litre was introduced on petrol, HSD and furnace oil in line with IMF requirements.
Retail fuel prices also edged up. Petrol rose from Rs252.10 per litre in December 2024 to Rs263.45 in December 2025, while HSD increased from Rs255.38 to Rs265.65 per litre.
In a notable shift in procurement strategy, Pakistan imported crude oil from the United States for the first time in 2025. The government also awarded 23 offshore exploration blocks after an 18-year gap.
At the same time, reduced demand for RLNG in the power sector prompted cancellation of 45 LNG cargoes for 2026-27 following negotiations with suppliers, a move expected to save hundreds of billions of rupees.
Gas sector adjustments included a 50% increase in fixed charges for all domestic consumers from July 1, 2025. Additionally, a Rs791 per MMBtu levy was imposed on gas supplied to captive power plants to meet IMF conditions.
Collectively, 2025 marked a year of structural recalibration for Pakistan's energy sector, combining debt containment and regulatory reforms with substantial fiscal measures that shifted significant financial obligations onto end users.