Pakistan seeks IMF approval for electricity tariff rebasing to ease consumer burden

ISLAMABAD: Pakistan has opted to officially inform the International Monetary Fund (IMF) about its planned rebasing of electricity tariffs to obtain the lender’s approval, aiming to alleviate financial pressure on consumers and reduce the risk of public protests, reported The Express Tribune.

Previously, the government had only communicated this plan verbally to the IMF. The high cost of electricity is known to incite public discontent, and tariff rebasing is anticipated to help mitigate such issues.

The government has provided policy guidelines to the National Electric Power Regulatory Authority (Nepra) regarding the adjustment of tariff determination timelines, amending the legal and regulatory framework for the new tariff to take effect from January 1 each year after completing the regulatory process. The ramifications of this adjustment have been considered in light of ongoing negotiations with the IMF.

In a recent meeting of the Economic Coordination Committee (ECC), the Finance Division reported that this proposal had been informally discussed with the IMF during earlier discussions. It advised formally notifying the IMF of the modification to maintain consistency with international obligations.

The government has now resolved to share the details of this proposal with the IMF. Currently, annual tariff rebasing begins on July 1, during the peak summer months when electricity demand and associated costs are at their highest. This timing places additional financial strain on consumers.

Officials noted that shifting the rebasing to January 1 would alleviate such challenges by aligning tariff adjustments with the lower consumption periods of winter, facilitating a smoother financial transition for consumers and allowing for more predictable electricity pricing throughout the year.

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Sources within Nepra indicated that the regulator supports this proposal in principle, while the Power Division has expressed its commitment to collaborating closely with the regulator for its implementation.

According to the existing tariff determination process governed by Section 31 of the Regulation of Generation, Transmission, and Distribution of Electric Power Act, 1997, and Rule 17 of the Nepra (Tariff Standards and Procedure) Rules, 1998, Nepra sets the end-consumer tariff for both ex-Wapda distribution companies (DISCOs) and K-Electric. The federal government last announced a uniform tariff on July 14, 2024.

As per the Nepra (Tariff Standards and Procedure) Rules, 1998, and the Nepra Determination of Consumer End-Tariff Guidelines, 2015, DISCOs must submit their minimum requirements by January 31 each year to kick off the tariff determination process, which encompasses internal discussions, public hearing, tariff determination, and subsequent government notification. Presently, the rebasing occurs on July 1 each year, coinciding with the peak summer months and leading to affordability challenges for consumers, which have resulted in increased costs during high-demand periods and sparked public dissatisfaction and protests.