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IMF virtual talks prelude: subsidies end, power tariffs hike approves by Cabinet

The Federal Cabinet has approved a new policy that aims to increase power tariffs and eliminate subsidies.

This decision comes ahead of the virtual talks with the International Monetary Fund (IMF) regarding the Memorandum of Economic and Financial Policies (MEFP).

The cabinet has also approved a revised circular debt management plan that will be circulated.

The policy-level talks between the IMF and the government have already been concluded, but an agreement couldn’t be reached due to differences in fiscal measures.

As per the new policy, the power prices will be raised by Rs7.91 per unit in four quarterly adjustments starting from February to November 2023.

The power tariffs will be increased gradually, with Rs3.21 per unit from now, Rs0.69 from March to May, Rs1.64 from June to August, and finally, Rs1.98 from September to November.

The consumer base tariff will increase from Rs15.28 per unit in June 2022 to Rs23.39 per unit in June 2023.

The government has also approved the withdrawal of electricity subsidies worth Rs65 billion given to exporters, effective from March 2023. By withdrawing these subsidies, the government aims to collect Rs51 billion from exporters and Rs14 billion from the end of subsidies under the Kissan Package.

The Rs12.13 per unit subsidy on electricity for the export sector will also be taken back.

The new policy aims to recover Rs250 billion from electricity consumers by June 2023, with a surcharge of Rs3.39 per unit being levied.

The government aims to collect Rs73 billion from the increase in quarterly adjustments by June 2023, which could make electricity more expensive by up to Rs4.46 this month.

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