Karachi: India’s recent suspension of the Indus Water Treaty poses a significant threat to Pakistan’s electricity affordability, warns Dr. Khalid Waheed, a Research Fellow at the Sustainable Development Policy Institute (SDPI). Speaking at a seminar organized by the Council of Economic and Energy Journalists (CEJ), Dr. Waheed highlighted the growing geopolitical tensions that threaten Pakistan’s reliance on hydropower as its most economical energy source.

The halt in the treaty by India is projected to reduce hydropower generation, forcing Pakistan to turn to costly fossil fuel alternatives to meet energy demands. Dr. Waheed noted, “Even a 1% drop in river water flow could spike power production costs by Rs. 5.8 billion, while a one-rupee depreciation could add another Rs. 8.2 billion to electricity generation expenses.”

In parallel, the Pakistani government has entered an agreement with the International Monetary Fund (IMF) under the Climate Resilience Program, committing to phase out slab-based electricity billing. This reform aims to eliminate cross-subsidies and implement cost-reflective tariffs, which might lead to increased expenses for low-consumption households. Currently, 54% of electricity users receive government subsidies as “protected consumers,” a figure set to drop to 40% under the new system, with subsidies distributed through the Benazir Income Support Programme (BISP).

To address long-term energy challenges, SDPI has proposed an initiative to provide solar panels to low-income households, reducing their dependency on the national grid. “This strategic shift could substantially lower household electricity bills and ease the government’s fiscal responsibilities by cutting recurring subsidy payments,” Dr. Waheed explained.

Additionally, Dr. Waheed expressed concerns over the European Union’s upcoming Carbon Border Adjustment Mechanism (CBAM), set to be implemented in 2030. This carbon tax threatens Pakistan’s textile exports to the EU, given the heavy reliance on coal-powered electricity, which inflates the sector’s carbon footprint. He urged the textile industry to adopt low-carbon technologies to sustain competitiveness in European markets.