ISLAMABAD: The International Monetary Fund (IMF) has approved only a Re1 per unit reduction in electricity tariffs. This comes after a grid levy was imposed on industrial captive power plants. However, the Islamabad High Court (IHC) has stayed the decision for over a month.
IMF Resident Representative in Islamabad, Mahir Binici, confirmed the tariff reduction. “The programme allows some explicit tariff differential subsidy. Revenue from captive power plants will be used to reduce Rs1 per kWh electricity price. The benefit will go to everyone,” he stated.
This contradicts claims by some government officials about an Rs8 per unit reduction in tariffs. That proposal remains under procedural and regulatory review. Consumers may not see any relief for weeks, if not months.
Petroleum Levy to Offset Tariff Cut
The federal cabinet has also approved an additional Rs10 per litre petroleum levy on petrol and diesel. The levy, imposed on March 15, aims to offset a promised Rs1.75 per unit reduction in electricity tariffs. Officials estimate the levy will generate Rs15 billion monthly, or Rs175-180 billion annually. However, the IMF has yet to clear this decision.
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Gas Supply Cut and Grid Levy Imposed
The government committed to disconnecting gas supplies to industrial captive power plants. This move was meant to shift industries to the national power grid, which has surplus capacity. However, influential lobbies pressured officials to reconsider.
The IMF held its ground but allowed a modification. In cases where gas disconnection was not feasible, gas prices would rise to LNG levels. A grid levy was also introduced to bridge the price gap between gas and grid electricity. Revenue from this levy was meant to lower average electricity tariffs.
Earlier this month, the government imposed a grid levy of Rs791 per million British thermal units (mmBtu) on LNG supply to captive power plants. This increased the price from Rs1,700 per mmBtu to Rs4,300 over three years. However, the levy has been stayed by IHC Justice Khadim Hussain Soomro until April 30.
Impact of the Court Stay
The court order means the Re1 per unit tariff cut cannot be implemented for now. Around 20 industrial units, mostly in the textile sector, challenged the levy in court.
Budget Negotiations and IMF Board Meeting
Authorities are negotiating with the IMF to finalize Pakistan’s fiscal targets. The primary budget surplus must remain at 1% of GDP and increase to 2% by fiscal 2028 under the IMF’s Extended Fund Facility (EFF) programme.
Officials aim to secure an IMF Executive Board meeting during the IMF-World Bank spring meetings from April 21 to 26. However, procedural delays may push approval to mid-May or early June.
Meanwhile, another IMF mission is expected in Islamabad by mid-May. It will finalize macroeconomic projections and budget measures for fiscal year 2025-26.
NEPRA Reviewing Tariff Petitions
The National Electric Power Regulatory Authority (NEPRA) is reviewing petitions for annual base tariff revisions. Seven independent power producers have applied for revised tariffs after negotiations with a civil-military task force.
Real Estate Taxation Unchanged
The IMF has refused to allow a reduction in tax rates on real estate transactions. However, a 2% federal excise duty on first transactions may be reduced in the upcoming budget.
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