Govt all set to reduce power tariff

ISLAMABAD: The federal government is all set to reduce power tariffs and it has formally submitted a request to the National Electric Power Regulatory Authority (Nepra) for reduction of Rs1.71 per unit in electricity prices.

According to the proposal, the reduction will be facilitated through an increase in the tariff differential subsidy. The proposed cut will apply to all distribution companies, including K-Electric, for the period from April to June 2025. However, lifeline domestic consumers will be exempt from this adjustment.

Nepra has scheduled a hearing on the government’s petition for April 4. If approved, the federal government will subsidise electricity consumers by Rs1.71 per unit during the specified period.

As reported by Geo News, the government aims to introduce this subsidy for three months to boost electricity demand. Nepra had determined a national average rate of Rs35.50/kWh for FY2024-25, while the government notified a lower national average tariff of Rs32.99/kWh from October 2024 onwards, bridging the gap through the tariff differential subsidy.

Meanwhile, the International Monetary Fund (IMF) approved a reduction of Re1 per unit in electricity tariffs, offering relief to all consumers. According to IMF officials, the tariff relief would be extended to all electricity users and financed through revenue generated from the levy imposed on gas-based captive power plants. The development follows the staff-level agreement (SLA) reached between the Washington-based lender and Pakistani authorities during the first review of the ongoing 37-month bailout programme.

Meanwhile, a well-placed government source revealed to The News the government decided to cut the electricity prices by Rs8 per unit, adding the decision has been taken in consultation with the IMF.

The source further said that Prime Minister Shahbaz Sharif may announce the decision to this effect himself as a gift to the nation before Eidul Fitr.

Separately, IMF Communications Department Director Julie Kozack confirmed that Pakistan would be disbursed $1.3 billion under the Resilience and Sustainability Facility (RSF), following approval by the Fund’s Executive Board. The new 28-month deal would support Pakistan’s efforts to mitigate and adapt to climate change, she added.

In her media briefing at the IMF headquarters in Washington, she said the IMF Executive Board on September 25 last year, approved a $7 billion EFF arrangement for Pakistan spanning over 37 months. She added that SLA on the first review was reached on March 25, while there was also another staff-level agreement reached on the same day on RSF. She said under the EFF arrangement, which is the first review under the programme, Pakistan will have access to $1 billion after the formal approval by the IMF’s Executive Board.

Meanwhile, the IMF turned down Pakistan’s request to expand financing for exporters under the Rs1 trillion Export Finance Scheme (EFS) and advocated for a gradual rollback of protections for the local auto industry, a senior official told The News on Friday. However, the Fund allowed Pakistan to borrow Rs1.25 trillion ($4.5 billion) from domestic banks to address its mounting circular debt without adding to public debt stock. Negotiations between the finance ministry and banks are ongoing, with lenders expressing willingness to provide funds, but the official said finalisation of terms remains under discussion. A technical team from the lender will visit Islamabad on April 4 to finalise fiscal measures for the 2025-26 budget, including taxation and spending adjustments.

Islamabad had sought the IMF approval to increase the EFS funding beyond Rs1 trillion, arguing that regional economies allocate multi-billion dollars annually to support their exporters. The IMF, however, declined, citing concerns over Pakistan’s fiscal stability and financial sustainability. The government has also agreed to adjust its auto sector liberalisation plan, gradually phasing out protections for local manufacturers, the official said.

Meanwhile, the government has established a high-level committee to review trade tariffs before the next budget. Additional Customs duties on select goods are set to be abolished starting in July, in line with broader IMF-directed economic reforms.

The IMF’s upcoming visit after Eid coincides with Pakistan’s budget preparations for June. The government had proposed tax cuts for key sectors, including construction, tobacco, and beverages, but the lender rejected most of them, particularly those on tobacco, citing public health risks. The IMF dismissed claims from tobacco companies that high taxes fuel illicit trade, arguing that tax reductions would increase healthcare costs.

On the other hand, the Federal Board of Revenue (FBR) is on track to missing its tax collection target for March 2025 by over Rs110 billion, signalling a significant revenue shortfall. However, FBR Chairman Rashid Mehmood Langrial stated that the actual shortfall for the month was slightly below this estimate. Sources claimed that the shortfall was so far standing at Rs132 billion in achieving its desired tax collection target for March 2025.

The FBR fetched Rs1,088 billion till March 28 (Friday evening) against the fixed target of Rs1,220 billion for the month. When contacted, the FBR high-ups said that some offices and commercial bank branches would remain open on Saturday, so more tax collection was expected.

Despite a downward revision in the FBR’s annual tax collection target from Rs12,970 billion to Rs12,334 billion for the current fiscal year in line with the IMF’s SLA under Extended Fund Facility (EFF), the FBR is again heading towards a substantial revenue shortfall for the ongoing month. The exact number of the shortfall will be ascertained on March 31, 2025.

The IMF and FBR high-ups are holding virtual parleys for readjustments in the last quarter revenue collection targets, but overall, the FBR would have to fetch Rs3,903 billion in the April-June period of 2025 in order to achieve the desired revised target.