The federal government’s plan to announce a substantial reduction in electricity tariffs has hit a roadblock with the International Monetary Fund (IMF), delaying the finalization of a staff-level agreement (SLA) under the $7 billion Extended Fund Facility (EFF).
Reports had suggested that Prime Minister Shehbaz Sharif would announce an Rs8 per unit electricity tariff cut in his March 23 address to the nation. However, no such relief was mentioned. Instead, the prime minister chaired a high-level meeting to review power sector issues alongside key ministers, advisors, and officials.
IMF’s Stance on Tariff Reduction
The proposed tariff cut was contingent on the IMF’s approval, which is currently reviewing Pakistan’s economic performance for the first half of the fiscal year. An official noted that the IMF’s assessment did not align with the government’s proposed financial adjustments.
Initially, the government suggested a Rs2 per unit tariff reduction based on potential savings from renegotiated Independent Power Producer (IPP) contracts. Later, an additional proposal sought to increase the petroleum levy by Rs10 per liter—raising it to the Rs70 per liter legal limit—to offset power tariff reductions.
Officials argued that this approach would be revenue-neutral, but the IMF demanded greater clarity and a more comprehensive fiscal strategy before approving any tariff adjustments.
Regulatory and Procedural Hurdles
The National Electric Power Regulatory Authority (Nepra) is currently reviewing annual base tariff revision petitions from power distribution companies (Discos). Meanwhile, only a few IPPs have formally approached Nepra for tariff adjustments following renegotiations.
Additionally, the government’s plan to revise the solar net metering policy faces resistance. The Economic Coordination Committee (ECC) has already approved a two-thirds reduction in buyback rates for future net-metering consumers, drawing criticism from former finance minister Miftah Ismail.
Government’s Next Steps
Prime Minister Shehbaz Sharif reaffirmed his commitment to renewable energy while directing officials to address public concerns over the solar net metering policy with factual explanations. He also instructed authorities to expedite the privatization of power generation and distribution companies.
Despite challenges, the government remains committed to delivering electricity tariff relief and has assured that a revised package will be announced soon.
