Pakistan Pledges Power Tariff Hike and DISCOs Privatisation to Address Financial Challenges


Islamabad has assured the International Monetary Fund (IMF) of timely electricity price increases and the recovery of pending generation costs exceeding Rs210 billion, signaling a move to enhance the financial viability of the power sector. This commitment, made during ongoing talks for a $1.1 billion loan tranche release, includes potential privatisation of power distribution companies (DISCOs) under concession agreements, marking a significant policy shift by the Pakistan Muslim League-Nawaz (PML-N) government.

Prime Minister Shehbaz Sharif’s recent formation of a committee to transfer DISCOs to provinces aligns with these assurances, reflecting a proactive approach to address sector challenges.

The Ministry of Energy’s commitment to implement the next annual base tariff adjustment by June, effective from July, indicates a third consecutive year of electricity price hikes. Despite concerns about constant price escalations, the government is focused on ensuring the financial sustainability of the power sector amidst a circular debt of Rs2.7 trillion.

The IMF, while discussing measures to reduce generation costs and recover outstanding dues, has emphasized reviewing policies related to Power Purchase Agreements and subsidised gas allocation to optimise resource allocation and mitigate price increases.

As negotiations progress smoothly, a staff-level agreement is anticipated next week, signaling potential policy reforms to enhance the power sector’s efficiency and financial stability.

Story by Shahbaz Rana

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