Prime Minister Shehbaz Sharif has instructed the Power Division to reduce electricity tariffs by Rs 7 per unit for all consumer categories, including industrial users, following consultations with the International Monetary Fund (IMF). The decision comes as an IMF team is scheduled to visit Islamabad next month.
BR reported, citing sources, that as part of the tariff reduction strategy, the government plans to secure Rs 2 per unit relief through revised IPP agreements, Rs 3 per unit from the removal of federal and provincial taxes, and additional savings by lowering the Return on Equity (RoE) for government-owned power projects.
Currently, taxes and surcharges account for approximately Rs 9 per unit on electricity bills, contributing to a total tax burden of Rs 964 billion annually.
The Finance Division, however, raised concerns that removing these taxes could affect fiscal targets outlined in the Extended Fund Facility (EFF) agreement with the IMF. Of the total tax burden, Rs 391 billion is attributed to federal taxes, while Rs 563 billion goes to provinces. Sales tax alone contributes Rs 708 billion, with income tax accounting for Rs 98 billion.
Officials estimate that eliminating taxes could reduce electricity bills by up to 40%, offering substantial financial relief to both households and businesses. The Prime Minister expressed optimism that the plan would be implemented smoothly with IMF coordination.
During a cabinet meeting, Prime Minister Sharif praised the Task Force on Structural Reforms in the Power Sector for its progress in renegotiating contracts with major power companies.
He reiterated his commitment to finalising the tariff reduction plan by April 2025, ensuring significant relief for consumers and enhancing the competitiveness of local industries.
The prime minister also expanded the “Tariff Reduction Committee” to include Lt General Muhammad Zafar Iqbal, National Coordinator of the Task Force on Energy, known for renegotiating Independent Power Producer (IPP) agreements. These renegotiations are expected to yield Rs 1.4 trillion in savings over the lifespan of the projects, with annual savings projected at Rs 137 billion.
The government has also decided to terminate proceedings by the National Electric Power Regulatory Authority (Nepra) against IPPs for abnormal profits and excess savings in operations and maintenance. This move will reportedly save Rs 67.51 billion annually in capacity payments and contribute to settling circular debt worth Rs 329 billion.
The committee, led by Deputy Prime Minister Ishaq Dar, includes key figures such as Muhammad Ali, Special Assistant to the Prime Minister on Power, and Ali Pervaiz Malik, Minister of State for Finance. The finalised plan is expected by February 10, with implementation slated for April 1, 2025.
