The federal government has approached the National Electric Power Regulatory Authority (NEPRA) for a reduction in electricity tariffs, following approval from the International Monetary Fund (IMF).
The government has proposed a cut of Rs1.71 per unit in electricity prices, which would be facilitated through a tariff subsidy. The power regulatory authority is scheduled to hold a hearing on April 4, Express News reported on Friday.
The proposed tariff reduction is intended to apply to all distribution companies, including K-Electric, with the subsidy set to take effect from April to June 2025.
The move comes a day after the International Monetary Fund (IMF) said that Pakistan can reduce electricity prices by Rs1 per unit using revenues from the Rs791 per unit levy imposed on gas used in-house for power generation by industries – the only measure the government has secured thus far.
This will lower electricity bills by 1.5%, but industries using gas to generate in-house power will have to pay 23% extra for gas to achieve this minimal reduction.
Revenues from captive power plant firms can be used to reduce electricity prices by Rs1 per kilowatt, said Mahir Binici, the Resident Representative of the IMF, in a brief statement on Thursday.
Binici made the statement a day after Pakistan and the IMF reached a staff-level agreement on the completion of the first review talks. Binici stated that the price reduction would benefit all consumers. However, the Islamabad High Court has already suspended the off-grid gas levy for at least five weeks.
Pakistan and the IMF have reached a staff-level agreement for the $1 billion second loan tranche, but the timing of the IMF board meeting remains uncertain.
The Rs1 per unit reduction suggests that the government and the IMF anticipate generating about Rs110 billion to Rs120 billion in revenues from the off-grid gas levy.
Prime Minister Shehbaz Sharif has long aimed to reduce electricity prices by at least Rs6 to Rs8 per unit.
However, the Power Division has yet to present a plan acceptable to the IMF that would result in a significant price cut. Pakistan has also been trying to convince the IMF to allow a reduction in electricity prices based on additional revenues from increased petroleum levies, reduced taxes, and downward revisions in fuel price adjustments and quarterly tariff adjustments.
The IMF remains unwilling to lower taxes on electricity bills. It has also not yet communicated whether it will allow the government to use an additional Rs180 billion in revenues from the recent Rs10 per litre hike in the petroleum levy to reduce electricity prices.
