The federal government has developed a plan to reduce electricity prices by 6 rupees per unit and shared it with the IMF.
The international financial institution has not yet approved the plan but has requested additional details.
Under this plan, the federal and provincial governments will arrange 2.8 trillion rupees in funding.
Of this amount, 1.4 trillion rupees will be sourced from cuts in the federal government’s Public Sector Development Program, the elimination of subsidies in the budget for certain sectors, some commercial loans, and dividends from state-owned enterprises.
The remaining 1.4 trillion rupees will be sourced by deducting half from the provincial governments’ shares allocated under the National Finance Commission (NFC).
However, the Khyber Pakhtunkhwa government has outright rejected contributing its share from the NFC, and the other provinces have not yet responded.
The Ministry of Finance is also unwilling to take ownership of this plan, although the Prime Minister’s Office is making strenuous efforts to make it successful.
The plan involves closing down inefficient power plants and either terminating or renegotiating contracts with Independent Power Producers (IPPs).
The federal government is currently in talks with stakeholders about this.
Sources suggest that provinces are hesitant to participate in the plan because, except for Khyber Pakhtunkhwa, all other provinces’ budgets are already out of control, and the plan would mainly benefit the central government of the Pakistan Muslim League (N).
Media contacted Federal Energy Minister Sardar Owais Leghari for information but was unable to reach him. However, the Ministry of Energy stated that discussions with the Khyber Pakhtunkhwa government on this matter have not been fruitful.
Khyber Pakhtunkhwa’s Finance Advisor, Muzammil Aslam, told media that his province is already generating electricity at 6 to 7 rupees per unit but purchasing it for its residential and industrial consumers at up to 70 rupees per unit.
The province is so disillusioned with the federal government that it is considering setting up its own power projects, transmission lines, and regulatory authority to provide cheaper electricity to its people.
Electricity prices for Pakistani consumers have become unbearable, with payments reaching up to 76 rupees per unit.
The federal government has provided a temporary relief of up to 51% for consumers using up to 200 units, but they will have to pay the full amount by October.
Currently, the average price of electricity per unit in Pakistan is 44 rupees, which the government aims to reduce to 38 rupees per unit.
Consumers using between 301 and 700 units pay 58 rupees per unit, while those using more pay 64 rupees per unit, and commercial users pay 76 rupees per unit.
The Pakistani government plans to reduce electricity prices by cutting profits from state-owned power plants and amending the terms with 12 Independent Power Producers.
Additionally, some inefficient power plants will be shut down after full payment is made to end their contracts.
Some power plants will also have local loans paid off, and a circular debt of 2.3 trillion rupees will be cleared.
Reducing profits from state power plants is expected to lower electricity prices by 1.15 rupees per unit. If the government successfully clears the 2.3 trillion rupees circular debt in one go, the price could be reduced by 2.83 rupees per unit.
Despite these efforts, issues related to line losses, theft, and subsidy recovery will persist.
According to sources, when the government shared this poorly prepared plan with the IMF, it faced more questions than answers, as the success of the plan depends on cooperation from local power producers and provincial governments.
The federal government informed the IMF that Punjab will contribute 699 billion rupees from its share, Sindh could contribute 351 billion rupees, but intriguingly, the federal government hopes to receive 231 billion rupees from Khyber Pakhtunkhwa as well.