As economy turns the corner, PM announces massive power tariff cut

ISLAMABAD: Following a consensus with the International Monetary Fund (IMF), Prime Minister Shehbaz Sharif on Thursday announced a reduction in power tariffs for domestic and industrial consumers by Rs7.41 and Rs7.69 per unit, respectively.

He termed it as an Eid gift, albeit a “small one,” and urged the business community to boost exports and contribute to the national exchequer by paying their due taxes. The premier promised a further reduction in power tariffs next month after implementing structural reforms in the loss-ridden power sector. He emphasized that the economy required a “surgical operation” rather than temporary fixes.

“This is giant step towards fulfilling promise as made in the party’s manifesto and announced by Muhammad Nawaz Sharif before the elections that we will gradually achieve milestones of economic stability in the country,” the prime minister said while making the much-awaited announcement at the well-attended ceremony.

The prime minister extended special thanks to Chief of Army Staff General Asim Munir and members of the Task Force for negotiating with Independent Power Producers (IPPs) and convincing them to forgo a staggering Rs3,696 billion over the next 15 years.

He outlined the government’s plan to eliminate the Rs2.393 trillion circular debt within five years, curbing Power Distribution Companies (Discos) losses of Rs600 billion, and moving toward privatisation or commercialization of Discos. He also announced an additional reduction in power tariffs next month.

“The revised agreements with IPPs will save Rs3,696 billion over 15 years, as these agreements span periods ranging from 3 to 25 years. The Task Force has done remarkable work in negotiating with the IPPs. The finance secretary also convinced the IMF to allow the increased petroleum levy to be utilised for reducing power tariffs,” PM Shehbaz stated during the ceremony at the PM Office on Thursday afternoon. The event was attended by Deputy PM Ishaq Dar, Finance Minister Mohammad Aurangzeb, Power Minister Awais Leghari, other cabinet members, and business leaders.

The premier noted that convincing the IMF to reduce power tariffs was a “Himalayan task,” as the Fund initially opposed cross-subsidies. However, Pakistan’s economic team successfully persuaded them to permit the use of higher petroleum levy collections for tariff reductions. He revealed that he had considered personally engaging the IMF managing director but credited the finance secretary-led team for achieving this breakthrough.

For domestic consumers, the power tariff previously stood at Rs48.70 per unit, which had already been reduced to Rs45.05. The new reduction of Rs7.41 per unit takes immediate effect. For industrial consumers, the June 2024 tariff of Rs58.50 per unit had been lowered to Rs48.19, with a further reduction of Rs7.69 per unit announced.

The prime minister acknowledged that certain “no-go areas” existed but expressed gratitude to COAS Gen Syed Asim Munir for his unwavering support in stabilising the economy and power sector.

He criticised the inefficiency of state-owned power plants (Gencos), which he described as “junk,” noting that Rs7 billion was being spent monthly on their security despite zero output. The government has now sold the first batch of Gencos, generating Rs9 billion. Additionally, Discos are incurring Rs600 billion in losses, prompting the premier to direct the power minister and relevant officials to curb theft and inefficiencies.

Recalling the economic crisis upon assuming office, PM Shehbaz condemned those who had attempted to derail the IMF programme through written appeals. He asserted that with the right intentions, solutions could be found to serve the nation. Citing an example, he mentioned how stay orders had stalled the collection of windfall taxes on banks. After engaging the Chief Justice of Pakistan, who assured merit-based rulings, the Sindh High Court vacated its stay order, enabling the collection of Rs23 billion in taxes. The Lahore High Court followed suit, allowing another Rs11 billion to be recovered the same day.

The prime minister expressed the confidence that the reduction in electricity prices would trigger economic activities in the country. “A significant reduction in power tariffs is crucial for uplifting industries and agriculture, as well as boosting exports,” he observed.

Shehbaz also noted that the economic stability was achieved due to sacrifices of masses which allowed the government to face challenges and take difficult decisions.

He gave away shields to the deputy prime minister, finance minister, power minister, Petroleum Minister Ali Pervaiz Malik, Special Assistant Muhammad Ali, Finance Secretary Imdadullah Bosal, Power Secretary Dr Fakhre Alam Irfan, National Coordinator on Task Force on Energy Lt Gen Muhammad Zafar Iqbal and FBR Chairman Rashid Langrial.

Appreciating the task force formed to finalise power reforms, the prime minister said the force worked really hard and through their innovative thoughts, they brought different options and managed to convince the IMF to reduce the power tariffs.

“We did not pass on the low international petroleum prices and retained the prices to ensure that the government could reduce the power tariffs to which IMF agreed in principle,” he added.

He said the trust with the IMF that was breached in 2020, was now being restored and also maintained that there was no room for any subsidies as per conditions assuring that the government would fulfill commitments made with the Fund. “We will fulfill commitments made with the IMF and we also take the Fund into confidence while taking any important decision in interest of masses,” he added.

He also extended his gratitude to his leader PMLN President Muhammad Nawaz Sharif and the allied political party leadership for their support and guidance in this regard.

Recalling the time when he took over the charge of Prime Minister, Shehbaz Sharif said Pakistan was on the verge of defaulting at that time and the nation, especially business community was afraid about the future of the country.

He said the government even had to face difficulties to open LCs for importing petroleum products and other essential items. “We did not have resources to even run the power sector as well.” The elements who were responsible for all these wrongs were excited to see Pakistan nearing default and were claiming that no one could save Pakistan from defaulting now, he added, noting those elements were dead sure that the country would default.

He said such elements crossed all limits, and it was the same group that breached its own agreement with the International Monetary Fund (IMF).

Later on, he said the same party also created hurdles in the way of the government’s negotiations with the IMF. “By doing this, they tried to save their own politics at the cost of country’s interests,” he added. “The Almighty saved the country from default. By the grace of Allah Almighty, we have achieved the basic economic stability and there has also been an improvement in microeconomic indicators,” he said.

At the same time, the prime minister stressed that further economic stability could not be achieved without effective right-sizing and privatisation. He said Pakistan’s economy had now become stabilised and was moving towards sustainable growth and development with challenges.

He said that Muhammad Nawaz Sharif, during election campaign had committed to bring the inflation rate that peaked at 38 percent down to single digit by 2026. “By the grace of Allah Almighty and due to the government team’s efforts, inflation has now eased to around 1.5 percent a year ahead.”

He said that in one year, the government had also reduced the petroleum prices by Rs38 to the lowest in the region. The policy rate, he said, that was 22.5 percent, had been lowered to 12 percent due to which the business community got an immense relief.

He emphasized that rightsizing and privatisation of the government owned entities was a part of difficult decisions which had to be made now. “The government has to face a huge loss of Rs800 billion due to the loss making SOEs.” He said all the government efforts would go in vain if it did not take action to get rid of these huge losses.

The prime minister claimed that this year, the government was going to collect 35 percent more taxes than the last year.

Earlier, Sardar Awais Leghari said the prime minister was enthusiastic to finalise the power package as soon as possible. He said the prime minister kept issuing guidelines all the time and worked really hard in this regard. “Along with hard work, we are also focusing on merit and transparency,” he said.

The government announced a reduction in electricity tariffs by an average of 15 percent (Rs7.41 per unit) for all consumer categories, effective immediately. A spokesperson from the Power Division confirmed to The News that the necessary petition has been submitted to the National Electric Power Regulatory Authority (Nepra) for formal notification of the revised rates.

For domestic consumers, which number 34.99 million and constitute 87 percent of total electricity users, tariffs have been reduced between 13 and 32 percent, with an average decrease of 17 percent. Lifeline consumers using up to 50 units per month, totaling 1,418,975, will continue paying Rs4.78 per unit, while those using 51-100 units, numbering 508,918, will maintain their current rate of Rs9.37 per unit.

Protected consumers using 1-100 units per month, comprising 7,462,890 consumers, will receive the highest relief at 32 percent (Rs6.14 per unit). Another category of protected consumers using 101-200 units, totaling 10,257,189, will see a 28 percent reduction (Rs6.14 per unit).

Domestic consumers using below 300 units, numbering 10,123,533, will benefit from a 17 percent decrease (Rs7.14 per unit). Consumers utilising more than 300 units or those with Time-of-Use meters will receive a comparatively lower reduction of 13 percent (Rs7.18 per unit).

Commercial consumers, numbering 4,211,802, will receive a 12 percent reduction (Rs8.58 per unit). General services consumers, totaling 251,861, will see a 13 percent decrease (Rs7.18 per unit). Industrial consumers, numbering 402,885, will benefit from a 13 percent reduction (Rs7.69 per unit). Bulk consumers, totaling 4,538, will receive a 12 percent cut (Rs7.18 per unit), while agriculture consumers, numbering 382,619, will enjoy a 17 percent reduction (Rs7.18 per unit).

Power Division sources revealed that the recent Rs7.41 per unit tariff reduction for domestic consumers comprises multiple components: Rs2 per unit from Fuel Price Adjustment (FPA) relief, Rs1.50 per unit via cross-subsidy funded by increased petroleum levy (Rs10/liter), Re1 per unit from gas levies on Captive Power Plants (CPPs), Rs3 per unit through renegotiated IPP agreements, and the remainder through Quarterly Tariff Adjustment (QTA) mechanisms.

The government also claims to have implemented progressive reductions in electricity tariffs across consumer categories since June 2024. For domestic consumers using below 300 units monthly, rates had decreased by Re0.88 per unit, bringing the current tariff to Rs41.24 from Rs42.14. Another category had seen a reduction of Re0.57 per unit, with rates now standing at Rs55.70 compared to the previous Rs56.27.

Commercial consumers had benefited from a Rs0.06 per unit reduction, while general services consumers had received a Rs0.53 per unit decrease. The industrial sector had witnessed the most substantial cut of Rs10.30 per unit. Bulk consumers had seen their tariffs reduced by Rs2.79 per unit, and agriculture consumers had gained a Rs1.63 per unit reduction.

Following the prime minister’s announcement, Nepra unveiled three major decisions aimed at easing consumer bills, directing state-run Discos and K-Electric to return significant amounts per kilowatt-hour.

Under the new orders, a negative quarterly tariff adjustment of Rs1.90 per unit—totaling Rs56.38 billion for the second quarter of FY2024-25—would benefit all consumers except lifeline and prepaid users from April through June 2025.

“This Rs1.90 per unit cut is part of the Rs7.41 per unit national tariff reduction announced by the prime minister,” a senior official of the Power Division confirmed to The News, noting that the support is financed by the government’s decision not to lower petroleum product prices and by an increased Petroleum Development Levy of Rs10 per litre.

In mid-March, the federal government decided to keep petroleum products prices unchanged by Rs10 increase in the petroleum development levy (PDL) on petrol and diesel from Rs60 to Rs70 per litre. This decision was made to comply with the IMF conditions.

Adding to the relief, Nepra mandated that K-Electric pass a negative fuel charge adjustment of Rs3.0218 per kilowatt-hour, based on January 2025 fuel charges, in its April bills. This provisional rate, applicable to all but lifeline, domestic protected, Electric Vehicle Charging Stations, and prepaid consumers, will be fine-tuned once the Multi-Year Tariff for FY 2024-30 is determined.

Nepra also ordered Discos to include an additional negative adjustment of Rs0.4641 per unit—stemming from February 2025 fuel charge variations—in April bills for all consumers except lifeline, protected, EV charging stations, and prepaid users.

Further enhancing consumer benefits, the regulator announced that the impact of negative retained Fuel Charge Adjustments, amounting to Rs23 billion, will be passed on at Rs0.90 per kilowatt-hour. This benefit will be extended to all consumers except those in the lifeline and protected domestic categories over the same three-month period, with any under- or over-recovery to be adjusted in forthcoming tariff petitions.

Meanwhile, the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has welcomed Prime Minister Shehbaz Sharif’s announcement of a significant reduction in electricity tariffs, terming it an “Eid gift” for the public and industrialists.

FPCCI President Atif Akram Sheikh emphasized that the tariff reduction, coupled with the recent decrease in the policy interest rate, will significantly resolve issues faced by industrialists. He credited the Prime Minister’s Task Force for its effective work in facilitating this decision. FPCCI Senior Vice President Saqib Fayyaz urged industrialists to capitalise on the development by boosting exports. He mentioned that 2025 would be the year of economic growth for Pakistan.

FPCCI Patron-in-Chief SM Tanveer highlighted the prime minister’s statement regarding the estimated Rs600 billion losses due to theft within distribution companies (Discos). He said that the anticipated privatisation of Discos is expected to curb these losses. FPCCI officials expressed gratitude to the prime minister, Chief of Army Staff, task force, and Special Investment Facilitation Council (SIFC) for their efforts.

Meanwhile, President of the Markazi Tanzeem-e-Tajran, Muhammad Kashif Chaudhry, while welcoming reduction in electricity tariffs, termed it as a good omen for the country’s progress. But he said that there was a need for further reduction in electricity tariffs, adding the government should announce a uniform slab system and end system of peak and off-peak hours. Kashif Chaudhry, while welcoming traders community for their struggle, called upon the government to review agreements with the remaining IPPs and control line losses, electricity theft and free electricity.