In the initial phase, the Ministry aims to eliminate a cross-subsidy of Rs592 billion to meet IMF demand
ISLAMABAD: Power Ministry has initiated plans to eradicate cross-subsidies within the power sector to fulfill International Monetary Fund (IMF)—a move that could heavily impact small electricity consumers across the nation.
If cross-subsidies are eliminated, consumers may face a staggering increase of Rs8 per unit in electricity tariffs. The latest move comes as part of the government’s efforts to meet IMF conditions, with the Ministry of Power actively working on tariff restructuring. In the initial phase, the Ministry aims to eliminate a cross-subsidy of Rs592 billion. Small electricity consumers are anticipated to bear the brunt of this restructuring, facing a substantial rise in tariffs.
Nepra, the regulatory authority, has also issued directives to review cross subsidies in line with the government’s agenda. The government extends a total subsidy of Rs976 billion to the power sector, with Rs434 billion allocated towards cross-subsidies and Rs158 billion earmarked as budgeted subsidy. Nepra has highlighted the challenges faced by industries due to cross subsidies, advocating for a restructuring of electricity tariffs.
Ministry of Energy is poised to present proposals to the government for the elimination of cross-subsidies and the subsequent increase in tariffs for small consumers. Even a 50 percent reduction in cross-subsidies could result in a tariff hike of Rs4 per unit. However, should cross-subsidies be completely terminated, consumers may be burdened with an additional Rs8 per unit. The fate of these proposed changes rests with the Prime Minister and the Cabinet, who will make the final decision following due deliberation.
