The FY27 Circular Debt Plan: Why New Per-Unit Surcharges Are Coming — and How Solar Locks In Your Savings

• By Best Solar Company PK
• 22 Jul, 2026
• Energy Savings
• 7 min read

If your electricity bill has felt like it grows a new line item every few months, you are not imagining it. The reason has a name: circular debt. And the government's plan to manage it in the new fiscal year — FY27, which runs from July 2026 to June 2027 — is being finalised at cabinet level right now. Understanding it tells you exactly where your per-unit rates are headed.

Here is the short version: the debt is being paid down by *you*, one unit at a time, through surcharges added on top of the base tariff. The FY27 plan continues that mechanism — and a legal cap that used to limit how big those surcharges could get has already been removed.

What the FY27 plan actually does

Pakistan's power-sector circular debt — the unpaid gap between what generators are owed and what the system collects — stood at roughly **Rs1.9 trillion** in mid-2026. The government has committed to lenders to pull that stock down toward **Rs1.6 trillion**.

To do it, the state borrowed about **Rs1.225 trillion** from a syndicate of 18 commercial banks, repayable over six years in 24 quarterly instalments. That loan is not free, and it is not being paid from general taxes. It is being serviced directly from your electricity bill through the **Debt Service Surcharge (DSS) of Rs3.23 per unit**.

Quarterly repayments run in the range of **Rs310–315 billion**, funded almost entirely by DSS collections from consumers. In FY2025-26 alone, power users were billed around **Rs278 billion** through this single surcharge.

The protection that quietly disappeared

Here is the part most households missed. Until recently, surcharges like the DSS were legally capped at **10% of the base tariff** under the NEPRA Act. That cap was a ceiling on how much extra the government could stack onto your per-unit rate.

Through the **Finance Act 2025-26**, that 10% cap was **scrapped**. The legal brake is gone. That is why the FY27 plan matters so much for ordinary bill-payers: the framework now allows per-unit surcharges to rise as high as the repayment schedule requires, with no statutory limit standing between the debt and your meter.

The government's own messaging promises bills will eventually fall — a headline **10% reduction by 2031** once the debt is cleared. But 2031 is five years away, and the path to it runs directly through per-unit charges you pay every single month until then.

Why surcharges hit harder than the tariff

Look closely at your bill and you will see the base energy cost is only part of the total. Stacked on top are the DSS, fuel-cost adjustments, quarterly tariff adjustments, electricity duty, and **18% GST** — most of them calculated *per unit consumed*.

That is the crucial mechanic. A surcharge of a few rupees per unit sounds small, but it multiplies across every kilowatt-hour you draw:

• A home using **1,000 units/month** pays the DSS on all 1,000 units — about **Rs3,230/month**, or nearly **Rs39,000/year**, from that one surcharge alone.
• Add fuel adjustments, duty and GST, and the *all-in* cost of a grid unit for a mid-to-high-slab household routinely lands between **Rs50 and Rs65 per unit** — well above the advertised base tariff.
• Because these charges are per-unit, the only reliable way to shrink them is to draw fewer units from the grid.

You cannot vote away the DSS. But you can decide how many units it applies to.

How going solar locks in your savings

This is where solar changes the maths. Every unit your panels produce and you consume on-site is a unit the grid never bills you for — which means it also escapes the DSS, the fuel adjustments, the duty and the GST. Solar does not just beat the base tariff; **it neutralises the entire surcharge stack** that the FY27 plan depends on.

Consider a typical **10kW rooftop system**:

• Installed cost today: roughly **Rs1.1–1.5 million** for an on-grid setup, or **Rs1.8 million+** for a hybrid system with lithium battery backup.
• Output: about **35–45 units per day**, or **1,050–1,350 units per month**.
• For a household currently paying **Rs35,000–50,000/month**, that typically cuts the bill by **70–90%**.

At those savings, a well-installed system often pays for itself in **roughly 3 to 4 years** — and then delivers 20+ years of near-free generation. Crucially, your payback *improves* every time the government adds another surcharge, because the grid unit you are avoiding keeps getting more expensive while your solar unit costs the same.

That is what "locking in savings" means. You are fixing your cost of energy today, in 2026 rupees, against a bill structure that is legally free to keep climbing.

The net-billing catch — and why self-consumption is now king

There is an important recent change. Under **NEPRA's Prosumer Regulations 2026**, new rooftop consumers moved from *net metering* to *net billing*. The buyback rate for surplus solar you export was cut to around **Rs8.13 per unit** for new connections (with some DISCOs referencing a national average purchase price nearer Rs11), down sharply from the old Rs25+ rate. Consumers who held valid net-metering agreements as of **9 February 2026** keep their old rate — around **Rs25.32/unit** — until that agreement expires.

The lesson for new installers is simple: **the money is now in self-consumption, not export.** Every unit you use yourself avoids Rs50–65 of all-in grid cost; every unit you export earns only about Rs8–11. So size your system to match your daytime load, and consider a hybrid/battery setup so evening usage runs on stored solar rather than surcharged grid power. Learn more in our guide to net metering vs net billing.

Frequently Asked Questions

**Will the FY27 circular-debt plan raise my electricity bill?** Directly or indirectly, yes — for grid consumers. The plan is serviced through per-unit surcharges like the Rs3.23 Debt Service Surcharge, and the 10% legal cap on such surcharges has been removed. Even if the base tariff holds steady, the surcharge lines on your bill are where the debt repayment lands.

**What is the Debt Service Surcharge and how much is it?** It is a per-unit charge — currently **Rs3.23 per unit** — added to fund repayment of the ~Rs1.225 trillion bank loan the government took to clear power-sector debt. It applies to every unit you buy from the grid, so higher consumption means a bigger DSS bill.

**Should I install solar now or wait for the promised 2031 bill cut?** Waiting means paying today's surcharges for five more years for an uncertain future discount. Installing now fixes your energy cost immediately and shields you from any surcharge increases in between. With payback around 3–4 years, most households come out ahead by acting sooner.

**Does net billing make solar not worth it anymore?** No — it changes the strategy. The low buyback rate only affects surplus you export. The core value now is self-consumption: every unit you generate and use yourself avoids Rs50–65 of grid cost. Right-sizing your system and adding storage keeps solar strongly profitable. See our solar payback breakdown for the full numbers.

**How big a system do I need?** Match it to your usage. A home billing Rs35,000–50,000/month is usually well served by a 10kW system; smaller homes may need 5kW. A proper load assessment before installation ensures you maximise self-consumption rather than exporting cheaply. ```

Best Solar Company PK designs and installs reliable solar systems in Rawalpindi, Islamabad, Lahore, Multan, Taunsa Sharif and Karachi. Contact us for a free survey and the best advice for your home or business.