Govt backtracks on electricity bill surcharge

ISLAMABAD: In a dramatic reversal, Finance Minister Muhammad Aurangzeb on Wednesday disowned the very proposal he announced a day earlier in his budget speech—imposing a 10 percent surcharge on electricity bills—despite Pakistan having already assured the International Monetary Fund (IMF) that it would implement the levy to manage circular debt repayments.

There is no such plan, the minister declared during his post-budget press briefing when asked if the surcharge would be enforced. The comment contradicts his budget speech on Tuesday, where he announced a proposed amendment to the Nepra Act empowering the federal government to impose and extend a 10 percent Debt Servicing Surcharge (DSS) “for a specific period and purpose.”

“In order to manage the repayment of current circular debt through refinancing, any debt servicing surcharge (DSS) will not be used for paying mark-up or profit but strictly for principal debt repayment,” he had said in parliament.

Aurangzeb during the briefing also confirmed the government has finalised Rs1.3 trillion in bank borrowing to retire power sector debt. “That surcharge was of the Power Division and a DSS was levied. The government wants to convert the costly credit into cheap credit to finance the circular debt and its retirement,” he told reporters.

He said recoveries in the power sector had improved, although “transmission losses are still to move in the right direction”. Due to these gains, power sector subsidies will be trimmed to Rs1.036 trillion in FY26, down from Rs1.19 trillion—saving Rs154 billion.

Yet, the IMF’s staff report, issued May 17, states that Pakistan committed to adopt legislation by June 2025 to remove the DSS cap and finance Rs1.252 trillion in new loans through DSS revenues over six years. This would repay Rs683 billion in PHL loans and Rs569 billion in arrears to producers. If DSS revenue falls short, it will be increased to meet payment targets.