ISLAMABAD: Although Prime Minister Shahbaz Sharif has announced a significant reduction in electricity prices for consumers across the country, excluding lifeline consumers, the full implementation of this decision will take time. This is because the Power Division and NEPRA have not completed their preparations.
This was indicated by the Chairman of NEPRA, Chaudhry Waseem Mukhtar, during a public hearing on Friday, where the government’s motion to reduce electricity tariffs by Rs 1.71 per unit was discussed. The reduction is expected to cover a projected collection of Rs 58.6 billion over 45 days, including 16 days in March and 90 days in April, May, and June.
The NEPRA Chairman stated that the process to implement the Prime Minister’s announcement has started, but it was clear that no concrete measures had been taken before the announcement. The reduction will begin next week, as three determinations — FCA, QTA, and a special Prior Year Adjustment (PYA) of Rs 23 billion (Rs 0.90 per unit) — were released a few days ago. The impact of these adjustments was Rs 5.02 per unit.
According to Additional Secretary of the Power Division, Mehfooz Bhatti, out of the Rs 7.41 per unit relief for domestic consumers and Rs 7.69 per unit for industries, Rs 5.97 per unit is the tariff reduction, while the remainder is related to taxes on petroleum products. It remains unclear whether the government has included the Re 1 per unit levy to be collected through the charge on CPPs, as this matter is pending before the Islamabad High Court (IHC).
Mr. Bhatti mentioned that the impact of the terminated Power Purchase Agreements (PPAs) of six Independent Power Producers (IPPs) had already been included in the QTA for the second quarter of FY 2024-25. The hearing on petitions from seven IPPs has been completed, and petitions from Gas Power Plants (GPPs) are about to be submitted, with a projected saving of Rs 1.88 trillion through revisions in PPAs for GPPs. Further savings are expected from Bagasse-fired IPPs.
Highly reliable sources have revealed that when the political decision to reduce tariffs was announced, the Power Division’s bureaucracy had no concrete figures. A committee led by Deputy Prime Minister/Foreign Minister Ishaq Dar, which also included Chairman of the National Task Force Lt. General Muhammad Zafar Iqbal, worked on the tariff reduction figures based on statistics provided by the Central Power Purchasing Agency (CPPA-G). These figures and justifications were also presented to the IMF team that recently visited Islamabad. NEPRA was not informed about the status of these figures.
In this regard, the Minister for Power, Sardar Owais Ahmed Khan Leghari, faced tough questions from journalists last Friday. One journalist pointed out the confusion among consumers, particularly within the business community and industry, about the reduction in electricity tariffs. It seemed that the government might have misled them, and the relief could be temporary. The Minister replied that this relief is intended to be sustainable. However, he clarified that if hydropower generation declines, interest rates rise, or international energy prices increase, the government may not be able to prevent a rise in electricity prices, as these factors are beyond the government’s control.
The Federal Minister also mentioned that the government might further reduce electricity prices during the annual rebasing of electricity tariffs, which is scheduled for June 2025. Although he did not provide details, it is speculated that this could be achieved by altering agreements with around 40 alternative energy plants (such as wind and solar), converting banks’ circular debts into loans at lower interest rates, and reducing profits from Chinese power projects. The Power Division, the Ministry of Finance, and the Energy Task Force are working on these matters.
The International Monetary Fund (IMF) has already approved the conversion of expensive bank loans into cheaper loans to reduce circular debts. The purpose of this step is to eliminate circular debt of power sector, which is impossible without bringing down losses of Discos.
