The federal government has formally requested a reduction in electricity tariffs IMF approves Rs1 per unit cut in electricity tarifffrom the National Electric Power Regulatory Authority (NEPRA), after securing approval from the International Monetary Fund (IMF).
The government has proposed a cut of Rs1.71 per unit, to be implemented via a subsidy that would cover all power distribution companies, including K-Electric. NEPRA is scheduled to hold a hearing on this proposal on April 4. The reduction, if approved, would be in effect from April to June 2025.
This development follows the IMF’s recommendation that Pakistan could reduce electricity prices by Rs1 per unit using revenue from a gas levy imposed on industries that generate their own electricity.
The Rs791 per unit levy on gas would enable a 1.5 per cent reduction in electricity bills. However, industries using gas for self-generated power would face an increase of 23 per cent in gas prices to offset the price cut.
Mahir Binici, the IMF’s Resident Representative in Pakistan, stated that revenue from captive power plants could be utilised to achieve this reduction.
However, he noted that industries generating their own power would bear the cost burden. His comments came after Pakistan and the IMF reached a staff-level agreement during the first review talks of their ongoing bailout programme.
Despite this potential relief for electricity consumers, the Islamabad High Court has temporarily suspended the gas levy for off-grid power users for at least five weeks.
Pakistan is also seeking further electricity price reductions as part of a broader economic agreement with the IMF. Prime Minister Shehbaz Sharif has expressed a long-standing goal of lowering electricity rates by Rs6 to Rs8 per unit, though efforts to present a plan that satisfies the IMF’s conditions have not yet succeeded.
In recent talks, the government has pushed to use additional revenue from increased petroleum levies and other tax adjustments to further lower electricity tariffs. However, the IMF remains reluctant to approve these measures, leaving the timing of the next IMF board meeting uncertain.
The Rs1 per unit reduction could generate between Rs110 billion to Rs120 billion in revenue from the gas levy, but further significant price cuts may still be some way off.
