Consumers in Pakistan faced a 10% sales tax on solar panels and the replacement of net metering with net billing for new connections in February, substantially lowering compensation for surplus electricity supplied to the grid, according to a report published on November 8, 2026. High electricity tariffs initially prompted the public to invest in private power generation, seeking cheaper electricity, greater reliability, and reduced dependence on the national grid. Despite these consumer benefits, government policy increasingly shifted toward discouraging solar adoption.
Government imposes sales tax and shifts to net billing
The policy adjustments enacted by the government included a 10% sales tax on solar panels alongside the February policy shift from net metering to net billing for new connections. This transition substantially lowered the financial return for surplus electricity that consumers feed back into the electrical grid. An associate professor of economics at the Lahore School of Economics noted that a more economically sustainable response would have involved restructuring costly contractual obligations, modernizing the grid, and establishing fair charges for network use.
Did You Know? In February, the government replaced net metering with net billing for new connections, which substantially lowered the compensation paid for surplus electricity supplied to the grid.
Political Power Over Economic Gains
Decentralized electricity generation threatens more than just power producers’ revenues. It also weakens an established system through which economic resources, contracts, subsidies, and regulatory discretion are concentrated. These instruments carry significant financial and political value for incumbents. Reforming them could improve overall economic performance while simultaneously reducing the influence of those who currently control them. Economically promising changes often redistribute political power, creating powerful incentives for incumbents to resist or dilute reforms.
Expert Insight: Elites may sacrifice economic gains, including their own, to preserve the political position from which future gains can be secured. This dynamic suggests that development problems cannot be resolved through better policy advice alone, but require institutional changes that reduce the ability of those in power to obstruct reforms.
Future Stakes in Artificial Intelligence
The challenge of overcoming political obstruction extends beyond current energy policy. Artificial intelligence is creating new opportunities while simultaneously challenging existing economic and political hierarchies. Whether Pakistan embraces these technological opportunities will depend largely on how it responds to a technology capable of redistributing power. Until existing political calculations change, the country may continue choosing a smaller economic pie for the sake of a firmer political grip.
Public turns to solar power to escape high tariffs
Why did the public begin investing in private power generation?
Consumers turned to solar power due to high electricity tariffs, seeking cheaper electricity, greater reliability, and reduced dependence on the national grid.
What specific changes were made to solar energy policy in February?
The government replaced net metering with net billing for new connections, which substantially lowered the compensation paid for surplus electricity supplied to the grid. In addition, a 10% sales tax was imposed on solar panels.
What alternative approach did the economics professor suggest?
An economically sustainable response would have restructured costly contractual obligations, modernized the grid, and established fair charges for network use.
How might emerging technologies like artificial intelligence test existing political and economic hierarchies in the future?
Related reading