he federal government has announced a massive hike in power rates for domestic consumers, making electric power one of the major expenses of monthly household budgets. Over the last year, the domestic tariff for power bills has been raised by 104 per cent.

The tariff was raised by more than Rs 7.50 per unit with effect from July 1.

Now, the domestic tariff is Rs 35 per unit for off-peak hours and over Rs 50 for peak hours that commence from 7 pm and last till 11 pm during summer months. For comparison’s sake, five years ago the domestic tariff stood at Rs 9 per unit.

A spokesperson for the government has rejected claims that peak hours have been enhanced by two hours a day (from 5 to 7).

The tariff for single phase connections is lower but the percentage of hike is similar to that of a three-phase meter.

On average, a low-income household running two fans, three lights and an electric iron daily consumes between 200 and 300 units of electricity a month.

Also, additional charges have been levied on the notified tariff. These include 17 per cent GST on the electricity bill.

The proposed Rs 7 a unit hike in tariff will not only add to the power cost. All consumers paying more than Rs 10,000 for electricity also have to pay 10 per cent advance income tax.

Before the current tariff hike, most of the households consuming less than 300 units per month were spared the income tax. Now, anyone consuming even 275 units will see their power bill cross Rs 11,000 and have to bear additional expenses of Rs 1,000 or more.

Then, there are other government levies like the television fee and the recently added radio fee of Rs 15, monthly fuel adjustment charges and so on. All these charges have added to the woesof citizens already struggling to make ends meet amidst skyrocketing inflation.

The prime minister has said that there will be no increase in the tariff for lifeline consumers using 100 to 200 units a month.

However, there is some confusion as the notified tariff has enhanced the cost of power supply for consumers using up to 100 units as well as those consuming 200 units.

Another factor is that the power tariff rises sharply after every 100 units up to 400 units.

This means that the consumer using 101 units will fall into the 101-200 unit brackets and will be charged at a higher rate for all units consumed. Users consuming 401 units will have to pay the tariff applicable on above 400 units for all units consumed.

The new development means that an increase of Rs 7 in tariff would add another Rs 1.11 to the power cost. All consumers paying more than Rs 10,000 for electricity also pay 10 per cent advance income tax. 

Consumers using 100 units per month will see their base tariff rise from Rs 13.4 per unit to Rs 20.4 per unit. Their monthly bill will increase by Rs 700 for electricity alone. Added to this will be additional government duties in the range of around Rs 500 per month.

Those consuming 200 power units per month will experience a rise in their monthly bill from Rs 3,700 to Rs 5,508, with a base tariff of Rs 27.91 per unit. The other charges will inflate the bill to around Rs 9,000.

Meanwhile, households consuming 300 units of electricity per month will get bills above Rs 10,000 as the base tariff rises further. They will have income tax and the usual additional power levies that could inflate their bill to over Rs 15,000.

Consumers using more than 400 units fall in the lower middle class. Their bills will get into the range of Rs 25,000-26,000.

The power bills will be an unbearable burden for low-income and middle-class consumers, particularly when they are facing inflation still ranged above 27 per cent.

For households surviving on a minimum wage of Rs 35,000, doubling power rates will mean a further cutting on essential expenses like food and basic healthcare.

These changes in electricity tariffs and peak hours aim to address the country’s economic challenges and meet some of the requirements set by the IMF. However, they have added to the financial burden on the people as they contend with high inflation rates.

Pakistan’s national average tariff today is close to Rs 35 per unit – almost double what it was two years ago. There is very little that can be done to create incremental demand on the national grid during a low economic growth cycle.

When tariffs are increasing like they are, there is a likelihood that demand will come under further pressure. A decline of 10 per cent year-on-year in FY23 electricity generation numbers says it all.

The country’s electricity use per connection has stayed stagnant for nearly 13 years as a direct consequence of a failure to find more usage and abrupt tariff revisions. Taxes, surcharges and duties to make up for the inefficiency now amount to over a third of the price paid by the consumer.

The argument that the government cannot sell electricity below its production cost has some merit but the way the cost of power production increases in Pakistan is rather strange.

The distribution losses have averaged around 17 per cent for over a decade. This is due to corrupt practices in vogue in the system. Mismanagement is another factor that has not been resolved over the last two decades.

Unfortunately, the IMF prescription has also been found wanting, overly reliant on revenue measures disguised as sector reforms.

The likes of Bangladesh have halved their transmission and distribution (T&D) losses into single digits in the last ten years by investing heavily in distribution system overhaul.

Pakistan, on the other hand, continues to struggle to bring the losses down.

The writer is a senior economic reporter at The News International, Lahore