Govt. approves Rs 1.72/kWh cut in electricity tariff,funded by Petroleum Levy

ISLAMABAD: The federal cabinet has reportedly approved a reduction of Rs 1.72 per unit in electricity tariffs, based on an assumption of Rs 160 billion in revenue from the Petroleum Levy (PL) at a rate of Rs 10 per liter on POL products, according to well-informed sources told Newzshewz.
On March 15, 2025, the Prime Minister’s Office had announced that the Rs 10 per liter relief on POL products would not be passed on to the public. Instead, a PL of Rs 10 per liter was imposed with the understanding that the revenue generated from this levy would be used to reduce electricity tariffs.
Sources indicate that OGRA has projected a monthly collection of Rs 40 billion at the rate of Rs 10 per liter, which would result in an annual impact of Rs 160 billion. This suggests that the Rs 10 per liter PL will likely remain in place for a year or more.
A reasonable reduction, up to Rs 8 per unit in electricity tariffs, is expected to be announced next month, pending the formal approval of revised agreements with Independent Power Producers (IPPs) by the National Electric Power Regulatory Authority (NEPRA).
According to Arshad Mohmand, Special Secretary of the Power Division, the reduction in electricity tariffs is yet to be finalized. A committee, led by Deputy Minister/Foreign Minister Ishaq Dar, is currently working on it, alongside an Energy Task Force headed by Power Minister Sardar Awais Khan Leghari.
Negotiations with the International Monetary Fund (IMF) are also ongoing regarding the tariff reduction of Rs 8-10 per unit. Most of the expected reduction will be based on savings of approximately Rs 4 trillion from revised or terminated contracts with IPPs and Gas Power Plants (GPPs).
Meanwhile, the IMF has approved a reduction of Rs 1 per kilowatt-hour in electricity tariffs for all consumers in Pakistan. This relief will be funded through revenue generated from a levy on captive power plants (CPPs). However, the government’s decision has been temporarily stayed by the Islamabad High Court (IHC).
Power Distribution Companies (Discos) have also requested an increase in their base tariffs through an adjustment for the indexation of the Multi-Year Tariff (MYT) component for FY 2025-26, along with other adjustments in the consumer end tariff.
The key components of the tariff petitions include the power purchase price, O&M costs, RoRB, depreciation, other income, net margin, and Prior Year Adjustments (PYA).
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