PM to announce power tariff reduction by Rs8/unit from April 1: report

Prime Minister Shehbaz Sharif is set to announce a reduction of Rs8 per unit in electricity tariffs starting April 1, 2025, following approval from the International Monetary Fund (IMF). The reduced rates will be reflected in consumer bills in May, The News reported. 

Of the Rs8 per unit decrease, Rs4.73 per unit will be a permanent reduction resulting from renegotiations with six Independent Power Producers (IPPs) and the revision of power purchase agreements (PPAs) for 16 IPPs under a take-and-pay model. 

Additionally, bagasse power plants will be delinked from the US dollar and aligned with the Pakistani rupee, and the return on equity (RoE) for government power plants (GPPs) will be reduced to 13% based on the Pakistani rupee, with the US dollar fixed at Rs168.

The tariff reduction will also incorporate the impact of the government’s decision not to lower petroleum product prices, which had decreased on the international market. This decision has been estimated to provide Rs168 billion in savings, which will be used to reduce power tariffs by Rs1.30 per unit for one month. 

Although the relief from petroleum price adjustments will be short-term, the IMF has approved this move as part of the government’s strategy to manage the fiscal impact of holding off on price cuts for three months. If international oil prices continue to fall, this could lead to up to Rs250 billion in relief, but only for a limited period.

In addition to the Rs8 per unit reduction, government officials are working on further measures to reduce tariffs by an additional Rs2 per unit, with final details expected to be announced on March 23. The government intends for Rs6 of the total Rs8 reduction to be a permanent adjustment.

Officials clarified that the government will not remove the Electricity Duty (ED) on bills, as the Punjab government has opposed its elimination. 

Additionally, the IMF has rejected a proposed reduction in the General Sales Tax (GST) on electricity bills from 18% to 12%, citing concerns about increasing the tax revenue deficit, which has reached Rs606 billion in the first eight months of the current fiscal year.

However, the government has agreed to eliminate the Rs35 fee for Pakistan Television (PTV), which will no longer be included in electricity bills starting July 2025. Instead, a separate budget allocation for PTV will be made in the FY2026 budget to ensure its operations continue smoothly.