PM announced Electricity Raes up to 7:59 per unit
ISLAMABAD: In a bid to provide relief to domestic residential and industrial consumers, excluding lifeline consumers, the government has announced relief of Rs7.4-7.59/kwh, 15-18% of existing tariff. Prime Minister also informed that, IMF is also on board with respect to this decision. Market closed at all time high of 118,938 points following announcement of this news.
Based on our understanding, the government is able to announce this relief after utilizing various components of tariffs including, Quarterly Tariff Adjustment (QTA) of 2QFY25 ~-Rs2/kwh which was supposed to take effect from Mar 2025, however, now this is expected from Apr 2025. This will remain effective from Apr-Jun 2025. QTA for 2QFY25 is higher as this generally includes capacity payment, which is showing negative adjustment of Rs51bn in 2QFY25, may be due to renegotiations with IPPs, in our view.electricity crisis in pakistan
Another major chunk of benefit is coming out of allocation of incremental PDL collection to Tariff Differential Subsidy (TDS), resulting in savings of Rs1.71/kwh. Federal government has already filed motion for this increase in TDS and NEPRA is scheduled to have public hearing on this matter on Apr 04, 2025. This will be applied from Apr – Jun, 2025. Apart from this, savings from monthly fuel cost adjustment are also under determination by the authorities. The savings through this will also be topped by savings of GST (VAT 18%). The said benefits will be for non-lifeline consumers, which are generally 60-80% of total consumption of country.
We believe, some components of this tariff will be reviewed again in Jul 2025 i.e. PDL/TDS amount allocation and Quarterly Tariff Adjustment is also subject to capacity payments and currency movement. While FCA is also function of regular fuel mix/price.
We believe, lower power tariff will be beneficial for steel, textile, select cement companies amongst others which rely on grid. However, continuity of this relief shall be subject to measures taken in Budget FY26, i.e. allocation of TDS/PDL and next Quarterly Tariff Adjustment.
Alongside this, prime minister also mentioned that, govt aims to privatize the DISCOs in line with IMF guidelines to make the sector viable and also plans to eliminate circular debt in 5 years period.
