Islamabad, December 22, 2025 – A escalating conflict between Pakistan’s Ministry of Energy (Power Division) and K-Electric (KE), the private utility serving Karachi, has emerged over the processing of Tariff Differential Subsidy (TDS) payments. The disagreement centers on whether subsidies should be calculated based on KE’s original tariff determinations or the revised ones issued by the National Electric Power Regulatory Authority (NEPRA).
The TDS mechanism allows the federal government to bridge the gap between the higher actual cost of electricity generation and distribution charged to KE and the uniform national tariff applied to consumers, ensuring Karachi residents pay rates comparable to those in other parts of the country served by state-owned distribution companies (Discos). Historically, this has involved billions in annual subsidies, with past allocations reaching hundreds of billions of rupees to maintain equity and prevent tariff shocks.
The current standoff stems from NEPRA’s review determinations issued on October 20, 2025, which revised KE’s multi-year tariff (MYT) for FY 2024-2030. These revisions, aimed at promoting regulatory consistency and reducing inefficiencies—such as excessive loss allowances and foreign currency-linked returns—effectively lowered KE’s allowable tariff by approximately Rs7.6 per unit in some components. The Power Division insists that TDS payments must align with these revised determinations to reflect the updated regulatory framework.
However, KE has challenged the NEPRA revisions through constitutional petitions in the Sindh High Court (SHC). On November 4, 2025, the SHC issued interim orders prohibiting any coercive action to enforce the review tariffs, which KE interprets as a restraining order. In intense correspondence, KE’s CEO Moonis Alvi has argued that provisional TDS claims must be processed using the original (pre-review) tariffs, citing Clause 2.1 of the TDS Agreement. This clause mandates the use of preceding tariffs when a court restraining order is in place.
Alvi emphasized in recent letters that by refusing to process claims based on original tariffs, the Power Division is indirectly enforcing the revised ones, violating SHC orders. He warned that such actions could amount to contempt of court, referencing legal precedents like Fakhurl Arfin v. FOP (2015) and Saifur Rehman v. Muhammad Ayub (1998). KE’s legal counsel, Dr. Farogh Naseem, echoed this, suggesting a Power Division letter dated December 8, 2025, risks contempt proceedings.
Additionally, KE asserts that under Clause 2.6 of the agreement, only it can prepare TDS balance reports, and unilateral revisions by the Ministry are void. Even the agent bank, Habib Bank Limited, is bound by SHC orders, KE argues, stating: “What cannot be done directly, cannot be done indirectly.”
The Power Division, through Deputy Secretary Abdul Mateen, has maintained its position on using revised tariffs, leading to stalled payments. While specific disputed amounts for the current period are not publicly detailed, the broader context involves significant sums—past TDS claims for KE have run into hundreds of billions, with delays impacting the utility’s liquidity and contributing to circular debt issues in the power sector.
This dispute highlights ongoing tensions in Pakistan’s power sector reforms, where efforts to standardize tariffs and curb inefficiencies clash with legal challenges from privatized entities like KE. Prolonged delays in subsidy releases could strain KE’s operations, potentially affecting power supply reliability in Karachi, home to over 20 million people and a major economic hub. It also underscores the fiscal burden on the government, which allocates substantial budgetary resources for TDS to maintain uniform national tariffs.
Analysts note that similar disputes have recurred, including mediation efforts in prior years over historic receivables and payables. Resolution may depend on SHC proceedings or renewed negotiations, but the impasse risks exacerbating circular debt and deterring investments in the sector.