IMF directs Pakistan to expedite tariff rebasing for Discos

The Fund also recommends accelerating cost-reduction reforms in the energy sector

The International Monetary Fund (IMF) has instructed the Power Division of Pakistan (PD) to ensure timely tariff rebasing, directing power Distribution Companies (Discos) to submit their tariff petitions for the 2024-25 fiscal year, as reported by Business Recorder.

Sources familiar with the matter reported that the IMF emphasizes the importance of meeting the deadlines for these petitions, which are set to take effect from July 1, 2024.

The upcoming rebasing will not only determine the necessary tariff increase but also update longstanding reference figures.

During discussions, the IMF team inquired about the expected tariff increase through rebasing. The Power Division, however, has yet to finalize these figures due to disagreements over the projections for the fiscal year 2024-25.

Regarding Pakistan’s circular debt issue, sources indicated that the Power Division is aligned with the IMF’s targets, achieving a circular debt figure of Rs378 billion against a target of Rs385 billion by December 2023.

Additionally, the division is progressing with reforms, including the privatization of Discos and the finalization of the Integrated Generation Capacity Expansion Plan (IGCEP) scheduled for April 2024.

The IMF, in a press release dated March 20, 2024, advised the government to continue with timely power and gas tariff adjustments to ensure tariffs reflect actual costs while protecting vulnerable consumers through progressive tariff structures.

The Fund also recommended accelerating cost-reduction reforms in the energy sector, including enhancements in electricity transmission and distribution, integration of captive power demand into the grid, and strengthening governance and management of distribution companies.

The Power Division addressed additional inquiries from the IMF, confirming that the budgeted Rs48 billion for 2023-24 is allocated for CPEC Independent Power Producers (IPPs) and explaining the January 2024 Fuel Charges Adjustment (FCA) of Rs7 per unit was a result of system constraints, as clarified in a recent public hearing chaired by the National Electric Power Regulatory Authority (Nepra).

The Power Division is aiming for an early completion of tariff rebasing to mitigate the financial impact of FCAs and Quarterly Tariff Adjustments (QTAs), seeking to lessen the burden currently passed on to consumers.

 

Monitoring Desk
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