Government Approves Electricity Cost Hike Amid IMF Pressure

ISLAMABAD: In response to International Monetary Fund (IMF) directives, the Pakistani government has sanctioned an increase in electricity costs, raising the basic electricity tariff by Rs5.72 per unit.

In a recent decision, the government approved a substantial increase in electricity prices starting from July.

Electric Shock

This increase, amounting to up to 51% or Rs7.12 per unit, marks the highest raise in percentage terms for lower income groups.

As a result of this decision, around 32.5 million consumers, mostly households, will face an additional cost totaling at least Rs580 billion in the current fiscal year. This added expense comes on top of the already high electricity bills, which consumers attribute to past mismanagement and flawed energy policies spanning three decades.

Of these 32.5 million consumers, 26 million households belong to the poorest to low-middle income brackets, which will experience the largest percentage increase in prices.

Additionally, for the first time, the government has introduced fixed monthly charges ranging from Rs200 to Rs1,000 per unit for residential electricity consumers.

The hike in power tariffs was a critical requirement set by the International Monetary Fund (IMF) for Pakistan to meet in order to qualify for the staff-level agreement for the next bailout package.

According to media reports, the federal cabinet endorsed the tariff adjustment through a circulation summary. The National Electric Power Regulatory Authority (Nepra) had recommended the increase, averaging Rs5.72 per unit, to the government. Once approved by the federal cabinet and forwarded to Nepra, a uniform tariff structure is expected to be implemented.

Additionally, the government has introduced fixed monthly charges ranging from Rs200 to Rs1,000 per unit for residential consumers, further exacerbating financial pressures.

Upon Nepra’s final approval, the federal government will issue a notification to enforce the revised tariff. This decision is anticipated to impose an additional financial burden of approximately Rs600 billion on electricity consumers.

Nepra’s decision will influence the basic electricity tariff for fiscal year 2024-25, with the approved adjustments slated to commence from July 1, 2024, according to sources familiar with the matter.