The federal government has shared with the International Monetary Fund (IMF) that it will increase the average electricity tariff based on annual adjustments from Rs. 5 to Rs. 7 per unit in July.

Despite the proposed increase, the government said it still expects to miss its circular debt reduction target, reported Express Tribune.

The IMF has also rejected the government’s proposal to reduce power tariffs for industries by increasing the burden on consumers by using up to 200 units per month through fixed charges.

The IMF has requested more details on the proposed increase of Rs. 7 per unit in average electricity tariff.

The current effective electricity price for domestic consumers is Rs. 62 per unit, which includes various surcharges and taxes. The expected tariff hike is tied to budget subsidies of over Rs. 1.2 trillion for the fiscal year 2024-25. If subsidy amounts change, it will affect the anticipated price increase.

Despite multiple electricity price hikes over the past two years, circular debt
remains an issue. For the current fiscal year, the government and IMF set a circular debt target of Rs. 2.3 trillion, but the Ministry of Energy indicated it may exceed this by Rs. 80-100 billion.

Meanwhile, the Ministry of Finance has suggested Rs. 920 billion in power subsidies for the next fiscal year, but no final decision has been made in this regard.

Efforts to manage the power sector, including a campaign against electricity theft, have not been sufficient. The energy ministry proposed a fixed monthly surcharge for consumers using up to 200 units, but the IMF opposed burdening domestic consumers to benefit industrial users.

Direct tariff differential electricity subsidies for the current fiscal year were estimated at Rs. 632 billion, with only Rs. 158 billion covered by the budget while Rs. 474 billion was paid by residential, commercial, and industrial consumers.

Source: Pro Pakistani