IMF urges Pakistan to shield low, middle-income groups in electricity tariff review

2026-02-14 - 06:46

WASHINGTON – The International Monetary Fund (IMF) on Saturday confirmed that it is holding ongoing discussions with Pakistan regarding proposed adjustments to electricity tariffs. IMF officials told international media that the talks are focused on ensuring that any changes do not disproportionately affect middle- and low-income households. The negotiations will also examine whether the proposed tariff revisions align with the government’s previous commitments. The officials said that a comprehensive review would be conducted to assess the potential effects of the tariff adjustments on inflation and the country’s overall economic stability, highlighting the importance of maintaining Pakistan’s macroeconomic balance. Nepra approves new electricity tariffs, ups fixed charges for households The National Electric Power Regulatory Authority (Nepra) has approved a revised electricity tariff structure, allowing the federal government to impose fixed monthly charges of up to Rs350 on domestic consumers — including protected households — consuming up to 300 units. For consumers using up to 600 units, fixed charges can be increased by up to 100 percent. At the same time, reductions in per-unit tariffs have been approved, with industrial consumers receiving cuts of up to Rs4.58 per unit, while certain domestic users will see reductions of up to Rs1.53 per unit. Nepra said the revised tariff structure falls within the approved consolidated revenue requirement and the Rs249 billion tariff differential subsidy (TDS) allocated for 2026. The authority noted that the current tariff is mostly volumetric, with more than 93 percent of system costs recovered through per-unit charges, while only seven percent comes from fixed charges. Key costs, such as generation capacity payments and NTDC/HVDC charges, are fixed, creating a mismatch between revenue and expenditure. The regulator emphasized that the National Electricity Plan envisions a gradual shift to a fixed-cost-based tariff model, with fixed charges covering at least 20 percent of total costs. The growth of rooftop solar and other renewable energy sources has reduced grid demand, reinforcing the need to move away from consumption-based tariffs. Under the new structure, fixed charges for domestic consumers (excluding lifeline users) range from Rs200 to Rs675 per kW per month. Increases in fixed charges for higher-usage and Time-of-Use consumers are offset by reductions in variable rates. Revenue from fixed charges will help reduce industrial cross-subsidies, resulting in per-unit tariff cuts ranging from Re1 to Rs4.58. Nepra said the revised tariff will generate an additional Rs132 billion annually, raising fixed-charge revenue from Rs223 billion to Rs355 billion, while total subsidies and cross-subsidies are expected to decline from Rs629 billion to Rs527 billion. This effectively eliminates a Rs102 billion cross-subsidy previously borne by industrial consumers. Protected consumers using 1-100 units will pay Rs200 per kW per month, while those consuming 101-200 units will pay Rs300 per kW. Non-protected users will pay Rs275 per kW for 1-100 units, Rs300 per kW for 101-200 units, and Rs350 per kW for 201-300 units. Fixed charges for higher consumption have also been revised, with those using 301-400 units now paying Rs400, 401-500 units Rs500, and up to 600 units Rs675 per kW. Users consuming 601-700 units will see a Rs125 reduction, and those above 700 units Rs325, bringing fixed charges down to Rs675 per kW. Variable tariffs have been lowered as well. Consumers using up to 400 units will receive Rs1.53 per unit relief, up to 500 units Rs1.25, 600 units Rs1.40, 700 units Rs0.91, and those above 700 units Rs0.49 per unit. The revised tariff has been forwarded to the federal government for notification within 30 days. Nepra warned that if the government fails to issue the notification on time, the authority will publish it in the official Gazette itself. Energy Minister Leghari calls Nepra report 2025 ‘factually incorrect,’ defends reforms