IMF shoots down plan to cut power tariffs, for now…Khaleeq Kiani
PM reiterates package to reduce electricity tariffs set to be announced soon
Official says govt needs to do a lot on legal, procedural and regulatory grounds to ensure relief
Shehbaz chairs meeting on power sector amid criticism, insists no changes in solar energy policy
ISLAMABAD: A substantial reduction in electricity tariffs, promised by the government, could not get past the International Monetary Fund (IMF), which is currently holding back a staff-level agreement (SLA) on the first biannual review of the $7bn Extended Fund Facility (EFF).
It was widely reported in the media through official leaks that the prime minister would announce a Rs8 per unit reduction in electricity rates in his speech to the nation on March 23. The prime minister, however, did not announce any such relief package in his Pakistan Day speech.
Instead, he presided over a meeting on the power sector in light of the last-minute hiccup. The meeting, also attended by Awais Leghari, Ahad Cheema, and Muhammad Ali the ministers for power, economic affairs, and privatisation, respectively PMs special assistant Tauqeer Shah, and other officials reviewed the power sector issues, a statement issued after the meeting said.
The PM Office announced on March 15 that the PM had decided to maintain the petroleum prices at the existing level against up to Rs13 per litre cut worked out by the oil regulator and the petroleum division. It was promised to transfer its financial impact to electricity consumers.
A package is being prepared with a comprehensive and effective strategy for power tariff cut, the PMO had announced, adding that a big relief package is ready for the consumers through the cushion arising out of changes in international oil prices and other measures.
However, the tariff package had to be screened by the IMF, which is currently in the process of reviewing Pakistans economic performance in the first six months of the ongoing fiscal year and outlook for the period ending June 30, 2025, and beyond. The purported numbers did not work out in the apolitical software of the IMF, an official told Dawn.
During the course of the March 4-14 review talks, a plan was shared with the IMF staff mission for around Rs2 per unit tariff reduction on account of some savings through the renegotiation of contracts with the Independent Power Producers. As an afterthought, the authorities were tempted to increase the petroleum levy on petrol and diesel by Rs10 to a maximum of Rs70 permissible under the Finance Act 2025 to divert the revenues towards maximising relief in power tariffs. This can have another impact of about Rs2-2.50 per unit.
The IMF should not have an issue given the trade-off, increasing the petroleum levy on oil products and using it for reducing power tariffs. It was revenue neutral, no subsidy or fiscal impact, an official said. He, however, added that the IMF usually looked at the whole picture instead of assuming a couple of billions here and creating a fiscal impact there.
Nepra hurdle
The National Electric Power Regulatory Authority (Nepra) is also seized with petitions from Discos for annual base tariff revision. On the ground, only 6-7 IPPs have reached Nepra for revised tariff adjustments following renegotiations with a civil-military task force. On top of this, a power division petition for revision in the solar-net metering policy changes has also to be decided by Nepra.
The government may have the sincerity and plan in mind but required a lot to materialise it on legal, procedural and regulatory grounds, the official said, adding that as an outsider with a 360-view of the larger picture, the IMF wanted clarity before making the decision. According to the official, the government may be able to finally secure around Rs5 per unit or so relief for power consumers only after it is able to back up with data.
Net metering policy
The meeting chaired by the prime minister on Sunday also discussed the devastating impact of criticism from former two-time PML-N finance minister Miftah Ismail on social media against changes in the governments solar net metering policy approved by the Economic Coordination Committee (ECC) of the cabinet, sources said.
A statement by the PMs Office after the meeting quoted the premier as saying that the promotion of renewable energy was the governments priority. He also directed the officials that confusion over the solarisation policy should be addressed through facts and figures. There is no change in the governments solar energy policy and priority, he was quoted as saying.
The ECC has already approved a two-thirds reduction in buyback rates from future solar net-metered consumers and other settlement restrictions. The power minister has been advocating utility-scale solar energy inductions from private investors through bidding instead of its net metering from consumers.
The prime minister also directed swift settlement of all legal and other matters related to the privatisation of generation companies, besides expediting the privatisation process of power distribution companies, the statement said.
He reiterated that a package was being formulated to reduce the electricity tariffs, which would be announced soon to provide relief to the public. He also directed the power division, water resources division, and petroleum division to improve their coordination for a comprehensive strategy in the energy sector.
Courtesy Dawn