Pakistan vs Bangladesh Electricity Tariff: A 2026 Side-by-Side
Why Pakistani industries pay double what Bangladeshi industries pay, and what the gap has done to Pakistani textile exports
By Asad Baig · Lahore · April 2026 · Approx. 5-min read
The numbers in one table
| Country | Industrial tariff per unit (2026) | Residential average per unit (2026) |
|---|---|---|
| Pakistan | Rs. 38-47 | Rs. 48 |
| Bangladesh | Rs. 18 | Rs. 22 |
| Vietnam | Rs. 15 | Rs. 18 |
| India | Rs. 22 | Rs. 28 |
Pakistani industries pay roughly double what Bangladeshi or Vietnamese industries pay for the same electricity. Pakistani households pay similar multiples to comparable Asian economies.
This article walks through why the gap exists, what it has cost Pakistan, and what would have to change to close it.
Why the gap exists
The single largest reason is capacity payments. Approximately 40 percent of every rupee on a Pakistani electricity bill goes to capacity payments to Independent Power Producers under take-or-pay contracts signed in 1994 and subsequent power policies.
Bangladesh did not adopt the take-or-pay structure that Pakistan did under the 1994 Power Policy. Bangladesh signed power purchase agreements with private investors, but on different terms. Returns were lower. Currency exposure was more limited. Take-or-pay obligations were narrower. The structural cost loaded onto Bangladeshi tariffs from contractual obligations is much smaller than in Pakistan.
Vietnam similarly avoided the over-generous IPP terms that Pakistan adopted. Vietnamese power generation grew significantly during the 2000s and 2010s, but on contract structures that did not commit Vietnamese consumers to the kind of ongoing capacity payment obligations Pakistani consumers face.
India's case is more complex. India has IPPs and capacity payment obligations of its own, but the Indian tariff structure benefits from much larger scale (greater dispersion of fixed costs across a much larger consumer base) and from regulated structures that have generally constrained capacity payment growth.
I have written about the broader explanation at Why Are Electricity Bills So High in Pakistan in 2026? and at my pillar on capacity payments.
What the gap has cost Pakistan
The clearest evidence of the cost is the textile industry comparison.
In 2000, Pakistan and Bangladesh had roughly equivalent textile exports of approximately $5 billion each. By 2024:
- Bangladesh: $47 billion in textile exports
- Pakistan: $16.5 billion in textile exports
Bangladesh grew nine-fold. Pakistan grew three-fold. Pakistan was ahead in 2000. Pakistan is now far behind.
Pakistan's share of the global textile market dropped from approximately 3.5 percent to approximately 1.7 percent over the same period. Bangladesh's share grew to over 6 percent.
The export gap is largely electricity-driven. Bangladeshi textile factories operate on Rs. 18/unit electricity. Pakistani textile factories operate on Rs. 38-47/unit electricity. The cost difference makes Pakistani products non-competitive in international markets where Bangladeshi competitors can deliver similar quality at lower prices.
The Pakistani textile sector has shed approximately 700,000 jobs in recent years. Over 187 textile mills have shut down in Punjab alone. Cotton production has fallen from 15 million bales to 5.5 million bales (a 63 percent collapse).
I have written about this at Why Did Pakistan's Textile Industry Collapse While Bangladesh's Grew? and at The Manchester That Closed Down: Faisalabad's Textile Collapse.
THE BANGLADESH TEST
In 2000, Pakistan and Bangladesh had equivalent textile export volumes. By 2024, Bangladesh exported nearly three times what Pakistan did. Bangladesh did not have the 1994 Power Policy. Bangladesh did not sign CPEC contracts at 27-34% dollar returns. Bangladesh provided its industry with cheap, reliable electricity. The result is the difference between $47 billion in exports and $16.5 billion. The difference is the price Pakistan paid for the IPP system.
What would close the gap
Closing the gap to Bangladesh, Vietnam, and India levels requires reducing Pakistani electricity tariffs to comparable industrial rates. The mechanisms are well-documented.
Convert IPPs to take-and-pay. Eliminate capacity payments for excess capacity. This alone would reduce Pakistani electricity tariffs by approximately 60 percent, bringing Pakistani industrial rates close to Bangladeshi levels.
Conduct forensic audits. Recover excess profits from IPPs that took payments above contractual limits. Estimated recoverable amount approximately Rs. 1 trillion per the 2020 inquiry.
Renegotiate CPEC IPP terms. Approximately 36 percent of Pakistani capacity payments flow to Chinese state-owned enterprises under CPEC. Renegotiation requires head-of-state engagement.
Reform NEPRA. Restructure the regulatory body that approved the tariff calculations producing the current gap.
Reverse the 2026 Prosumer Regulations. Allow solar prosumers to remain on the grid at fair pricing, reducing pressure on the remaining customer base.
I describe the full ten-step reform agenda at my pillar on the IPP system.
None of this is technical fantasy. Every step has been documented and costed. The constraint is political will, not technical capacity.
What you should take away
Three things.
Pakistani industrial tariffs are roughly double Bangladeshi industrial tariffs. This is the single most important fact for understanding Pakistani industrial competitiveness.
The gap is largely capacity payment driven. Bangladesh did not adopt the take-or-pay structure that Pakistan did. Vietnam did not. The structural cost difference flows directly into final tariffs.
The gap is reversible through documented reforms. The mechanisms exist. The political will to implement them has been absent for thirty years.
Now you know the comparison. Pass it on.
Thank you for reading.
, Asad Baig, Lahore, April 2026
Frequently asked questions
Why is electricity cheaper in Bangladesh than in Pakistan? Bangladesh did not adopt the take-or-pay capacity payment structure that Pakistan did under the 1994 Power Policy and its successors. Approximately 40 percent of Pakistani bills go to capacity payments to IPPs. Bangladesh's structural capacity payment obligations are much smaller. The result is roughly half the per-unit industrial tariff.
How does Pakistan's textile industry compare to Bangladesh's? Pakistan exported $16.5 billion in textiles in 2024. Bangladesh exported $47 billion. In 2000, both were at approximately $5 billion. Bangladesh grew nine-fold while Pakistan grew three-fold, largely because Pakistani textile factories pay roughly double what Bangladeshi factories pay for electricity.
Can Pakistani electricity tariffs be reduced to Bangladeshi levels? Yes, through documented reforms including conversion of IPPs to take-and-pay structures, forensic recovery of excess profits, CPEC IPP renegotiation, and NEPRA reform. The estimated reduction is approximately 60 percent of current tariffs, which would bring Pakistani industrial rates close to Bangladeshi levels.
Sources and notes
- IEEFA Reports on Pakistan Power Sector by Haneea Isaad (2024-2025)
- International Growth Centre, Sustainable Pakistan Growth Brief (June 2025)
- APTMA position papers 2023-2025 on regional tariff comparisons
- Pakistan Bureau of Statistics, textile export data
- World Bank Doing Business reports, electricity cost components
Related reading from Asad Baig
The pillar this answers under
Sibling long-tail explainers
- Why Did Pakistan's Textile Industry Collapse While Bangladesh's Grew?
- The Manchester That Closed Down: Faisalabad's Textile Collapse
- Why Are Electricity Bills So High in Pakistan in 2026?
Asad Baig