Karachi: In response to meet the International Monetary Fund (IMF) demand, the government has taken steps to eliminate subsidies in the power sector, a move that could significantly affect small electricity consumers across the country.
As part of this plan, consumers may face a substantial increase of Rs8 per unit in electricity tariffs if cross-subsidies are eliminated. This tariff restructuring is in line with the government’s commitment to meeting IMF requirements, and the Ministry of Power is actively involved in implementing the changes.
The Ministry’s initial goal is to eliminate a cross-subsidy of Rs592 billion, which could disproportionately impact small electricity consumers currently benefitting from subsidized rates.
Nepra, the regulatory authority, has been instructed to reassess cross-subsidies to align with the government’s objectives. Currently, the government provides a total subsidy of Rs976 billion to the power sector, with a significant portion allocated to cross-subsidies.
The industrial sector has struggled with these subsidies, prompting Nepra to advocate for a restructuring of electricity tariffs. As a result, the Ministry of Energy is drafting proposals for the government, emphasizing the need to eliminate cross-subsidies and the potential tariff hikes for small consumers.
Even a 50% reduction in cross-subsidies could lead to a tariff increase of Rs4 per unit. However, completely ending cross-subsidies could impose an additional burden of Rs8 per unit on consumers.
The fate of these proposed changes now rests with the Prime Minister and the Cabinet, who will make a final decision after carefully considering the potential impacts on consumers and the economy.