In a significant move to ease the financial burden on consumers, the federal government of Pakistan is expected to announce a major cut in electricity tariffs. Power Distribution Companies (Discos) have submitted a petition for a negative adjustment of around Rs. 52.123 billion, roughly Rs. 2 per unit, for the second quarter of the fiscal year 2024-25. This adjustment is part of the country’s Quarterly Tariff Adjustment (QTA) mechanism and is expected to come into effect from March 2025.
The announcement of this price reduction will bring much-needed relief to millions of electricity consumers across Pakistan. With this adjustment, electricity costs will be lowered, easing the financial load on households and industries alike. A public hearing for reviewing the tariff adjustment will be held by the National Electric Power Regulatory Authority (NEPRA) on February 12, 2025. The hearing will involve discussions on the petitions submitted by the Central Power Purchasing Agency Guaranteed (CPPA-G), which oversees the country’s electricity pricing system.
This positive adjustment follows a combination of factors that have led to a drop in energy costs. One key reason for this reduction is a favorable change in the exchange rate, which was lower than initially expected. The exchange rate was Rs. 278/$ instead of Rs. 300/$, and the reduction in interest rates further contributed to this positive adjustment. The upcoming price relief will be applicable to electricity tariffs for the months of March, April, and May 2025. This will replace the current QTA of Paisa 19.5 per unit, which is set to expire on February 28, 2025.
In addition to this relief, Prime Minister Shehbaz Sharif has instructed the Power Division to further reduce electricity tariffs by an additional Rs. 7 per unit, especially benefiting industrial consumers from April 2025 onwards. When combined, the total reduction in electricity prices will range from Rs. 9 to Rs. 10 per unit, which is a welcome change for the public and industrial sectors alike.
The government believes that these price reductions are achievable due to the termination of Power Purchase Agreements (PPAs) with five Independent Power Producers (IPPs), as well as the renegotiation of contracts with eight bagasse-fired and 15 other IPPs. These actions are expected to save the country an estimated Rs. 137 billion annually. Overall, the government aims to save Rs. 1.14 trillion in energy costs, a move that will have long-term benefits for the economy and help reduce the financial strain on consumers.
It is important to note that while K-Electric consumers will also benefit from the third quarterly adjustment for FY25, lifeline consumers who are already receiving subsidies will not be eligible for this relief.
As the electricity tariffs decrease, it is expected to lead to a significant reduction in energy costs for Pakistan’s population, benefiting both residential and commercial sectors. The government’s efforts to lower electricity prices, along with the favorable adjustments in tariffs and contracts, are set to create a positive economic impact for the country.
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