Government Increases Power Tariffs to Unlock IMF Program

In a strategic move to secure a $6 billion IMF program, the Pakistani government has announced significant increases in power tariffs for both protected and unprotected consumers effective from July 1, 2024. This adjustment is a prior action required to unlock the financial support from the IMF.

Key Adjustments in Power Tariffs:

1. Protected Consumers:
   • 1-100 Units: 51% increase (Rs7.74 to Rs11.69 per unit).
   • 101-200 Units: 41% increase (Rs10.06 to Rs14.16 per unit).
2. Unprotected Consumers:
   • 1-100 Units: 43% increase (Rs16.48 to Rs23.59 per unit).
   • 101-200 Units: 31% increase (Rs22.95 to Rs30.10 per unit).
   • 201-300 Units: 26% increase (Rs27.14 to Rs34.26 per unit).
   • 301-400 Units: 22% increase (Rs32.03 to Rs39.15 per unit).
   • 401-500 Units: 17% increase (Rs35.24 to Rs41.36 per unit).
   • 501-600 Units: 17% increase (Rs36.66 to Rs42.78 per unit).
   • 601-700 Units: 16% increase (Rs37.80 to Rs43.92 per unit).
   • Above 700 Units: 14% increase (Rs42.72 to Rs48.84 per unit).

Context and Implications:

New Base Tariff:

• FY25: Rs35.50 per unit.
• FY24: Rs29.78 per unit (previous base tariff).

Revenue Projections:

• The government expects to secure Rs3.6 trillion from electricity consumers in FY25.

Subsidies and Economic Impact:

• A Rs440 billion subsidy is allocated to mitigate the impact on vulnerable consumers, who will face less than a 2% increase on average.
• Wealthier consumers will see an average increase of 9% in their tariffs.
• A projected 3% decrease in tariffs for all categories by January 2025 is anticipated.

Fixed Charges Adjustments:

• Industrial users: From Rs440 to Rs1,250.
• Commercial users: From Rs500 to Rs1,250.
• Agricultural tubewell users: From Rs200 to Rs400.
• These changes are set to be implemented from July 1, 2024.

Conclusion

The tariff adjustments are part of a broader strategy to meet IMF requirements, aiming to stabilize Pakistan’s economy while addressing financial challenges in the power sector. The government has taken steps to balance the burden across different consumer categories, with a significant focus on maintaining support for vulnerable populations and stimulating industrial activity through revised tariff structures.