Govt to finance electricity tariff reduction through Rs58bn PDL from oil consumers

The government is expected to finance the recently announced reduction in electricity tariffs of Rs 7.41 per unit by tapping into the pockets of oil consumers, redirecting an additional Rs58 billion in petroleum development levy (PDL) to cross-subsidise electricity prices, according to a news report. 

During a public hearing on Friday, the National Electric Power Regulatory Authority (Nepra) discussed the government’s petition to reduce electricity tariffs by Rs1.71 per unit for three months, in response to the PDL adjustments. 

Nepra Chairman Waseem Mukhtar clarified that the immediate relief for consumers would be Rs5.03 per unit, set to be implemented in the coming days, with the remaining relief to be applied through the quarterly tariff adjustment (QTA) for the third quarter.

The government has increased the PDL on petrol and diesel from Rs60 to Rs70 per litre, with the additional revenue generated by the PDL being used to fund the electricity tariff reduction. The government has earmarked a total of Rs266 billion for the tariff differential subsidy, which will increase to Rs324 billion with the new proposal. 

However, Nepra emphasised that the relief would not apply to lifeline consumers, and the subsidy is being provided through quarterly adjustments rather than the usual annual rebasing due to current economic constraints.

Officials from the Power Division explained that the PDL, amounting to Rs58 billion, would offset the cost of electricity relief announced by Prime Minister Shehbaz Sharif on Thursday. 

The reduction will also be supported by savings from renegotiated power purchase agreements with Independent Power Producers (IPPs), resulting in an additional Rs12 billion in savings, as well as ongoing negotiations with banks to address the power sector’s circular debt. These measures are part of a broader strategy to reduce liabilities within the sector.

Industrial representatives, including Aamir Sheikh, raised concerns over discrepancies in the figures provided by Nepra and the Power Division regarding the exact amount of relief. They sought clarification on whether the QTA relief would be implemented in the current quarter (April-June) or pushed to the next quarter (July-September). Sheikh emphasized the need for clear communication to allow businesses to plan accordingly, particularly for export sales.