The federal government has approached the National Electric Power Regulatory Authority (NEPRA) for a reduction in electricity prices, following the approval of the International Monetary Fund (IMF).
The government has proposed a reduction of RS1.71 per unit at electricity prices, which would be facilitated by a pricing subsidy. Power Regulatory Authority is expected to hold an audience on April 4, Express News reported on Friday.
The reduction in the proposed prices is intended to apply to all distribution companies, including K-Electric, the subsidy should take effect from April to June 2025.
This decision comes one day after the International Monetary Fund (IMF) said that Pakistan can reduce RS1 electricity prices per unit using RS791 revenues per unit of levy imposed on the gas used internally for industries – the only measure that the government has obtained so far.
This will reduce electricity bills by 1.5%, but industries using gas to generate internal power will have to pay 23% more for gas to reach this minimum reduction.
Revenues from captive electric power plants can be used to reduce RS1 electricity prices per kilowatt, said Mahir Binici, the resident representative of the IMF, in a brief statement on Thursday.
Binici made the declaration one day after Pakistan and the IMF have entered into an agreement at the level of staff at the end of the first talks in the journal. Binici said price reduction would benefit all consumers. However, the High Court of Islamabad has already suspended the tax on gas out of network for at least five weeks.
Pakistan and the IMF have entered into a staff level for the second 1 billion dollars loan tranche, but the IMF board’s meeting calendar remains uncertain.
The reduction of RS1 per unit suggests that the government and the IMF provide for a generation of around 10 billion rupees at 120 billion revenue rupees from the tax on the gas out of network.
Prime Minister Shehbaz Sharif has long aimed to reduce electricity prices from at least RS6 to RS8 per unit.
However, the division of powers has not yet presented an acceptable plan for the IMF which would cause a significant price drop. Pakistan has also tried to convince the IMF to allow a reduction in electricity prices on the basis of additional income from the increase in petroleum samples, reduced taxes and the downward revisions of fuel prices and quarterly tariff price adjustments.
The IMF is not willing to reduce taxes on electricity bills. It has not yet communicated if this will allow the government to use an additional revenue of RS180 in income from the recent increase of RS10 per liter in the oil tax to reduce the prices of electricity.
