Prime Minister Shehbaz Sharif’s announcement of a Rs7.41 per unit cut in electricity rates comes as a much-needed relief for households and businesses struggling with exorbitant power bills. Unlike previous targeted subsidies, this reduction is across the board, covering not just domestic consumers but also commercial and industrial ones. This is a significant move, especially for industries that have long argued that high electricity costs make Pakistani exports uncompetitive in global markets.
However, even with this reduction, electricity prices remain steep, and Pakistan’s industries will continue to struggle against regional competitors like India and Bangladesh, where power tariffs are significantly lower. For businesses reliant on energy-intensive production, the high cost of electricity remains a major hurdle to boosting exports. Another concern is the economic sustainability of this tariff cut. Pakistan’s ongoing 37-month bailout programme with IMF has already placed strict conditions on fiscal discipline.
The recent agreement securing an additional $1.3 billion from IMF indicates that economic management is being closely scrutinised. The Fund had allowed only a Re1 per unit reduction in power tariffs – far lower than what the government has now announced. If this decision is not in line with the agreed financial framework, it could put future negotiations and disbursements at risk.
The country’s power sector is already plagued by inefficiencies and reliance on expensive energy imports. Any tariff reduction without a corresponding revenue strategy could deepen fiscal imbalances, forcing the government to either increase subsidies or accumulate further debt.
If this reduction is indeed viable within the economic framework agreed upon with IMF, the government must transparently outline how it intends to offset the financial impact. Without clarity on whether revenue from captive power plants or other adjustments will cover this relief, citizens may find themselves facing even higher tariffs in the future.
#Power #relief
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