ISLAMABAD: The government intends to reduce electricity tariff by up to Rs 8 per unit within the next couple of weeks.
This will be contingent on approval from the International Monetary Fund (IMF). However with staff level agreement not reached and further negotiations to be held virtually as per the IMF mission leader’s press release uncertainty remains. In addition there is also uncertainty regarding which consumer categories will benefit from this proposed relief.
The industrial sector, in particular, is concerned that the tariff reduction will apply on an incremental basis rather than on actual consumption. “An incremental tariff is discriminatory. Some consumers will receive significant benefits, while others may get none. It could also mean that two consumers with similar current costs would face different charges—one might see a decrease, while other might be forced to shut down,” one industrial consumer explained.
IMF, Pakistan make ‘significant progress’ toward reaching Staff Level Agreement
The issue was discussed in detail during a meeting this week, chaired by Deputy Prime Minister and Foreign Minister Senator Ishaq Dar. The tariff reduction is expected to result from savings achieved through the termination of contracts with five Independent Power Producers (IPPs), adjustments to contracts of bagasse-fired IPPs, revisions to IPP and government power plant contracts, and changes to taxes on electricity bills.
Last week, Prime Minister Shehbaz Sharif assured a delegation of businessmen, led by former Caretaker Minister for Commerce, Gauhar Ijaz, that the reduction would take place before April 2025.
The current tariff regime includes about nine elements, and by revisiting them, the electricity tariff could potentially be lowered by Rs 10-12 per unit. However, the IMF reportedly rejected the removal of taxes from electricity bills due to the low recovery rate by the Federal Board of Revenue (FBR), and provinces are unwilling to eliminate the electricity duty. As a result, the expected reduction is around Rs 8 per unit.
A Federal Minister revealed that the Prime Minister plans to announce the tariff reduction on March 23, 2025, in a bid to provide the industrial sector with electricity at regionally competitive rates. However this predated the IMFs intimation through a press release that the staff level agreement was not reached.
In January 2025, the Prime Minister directed the Power Division to reduce electricity tariffs by Rs 7 per unit starting in April 2025. He also expanded the tariff reduction committee to include the then SAPM on Power (now Advisor on Privatisation), Lt. General Muhammad Zafar Iqbal, and the National Coordinator of the Power Sector Task Force.
The committee has since reviewed power tariff reform proposals, with the Task Force providing a comprehensive analysis. The Deputy Prime Minister commended the Task Force’s efforts in this regard.
Currently, the pool price of electricity stands at Rs 35 per unit, excluding taxes and surcharges. Some relief has already been passed on to consumers through negative adjustments in Quarterly Tariff Adjustments (QTAs) and Fuel Charge Adjustments (FCAs).
Copyright Business Recorder, 2025