ISLAMABAD: The Economic Coordination Committee (ECC) of the Pakistan government on Tuesday formally approved subsidy-neutral discounted electricity rates during winter in a bid to boost consumption and cut the use of natural gas for heating, the finance ministry said.
The move is expected to provide relief to businesses and citizens, who have suffered from steep and sudden increases in electricity tariffs following energy sector reforms suggested by the International Monetary Fund (IMF). Utilities in Pakistan, many of which have had to curtail or even completely cease operations in winter months due to demand dropping by up to 60 percent from peak summer levels, will also benefit from the move.
Pakistan relies heavily on expensive natural gas and burning wood for heating during winter. Power consumption in Pakistan has declined 8-10 percent year on year over the past three quarters, according to energy ministry figures.
The new winter package, which will apply between Dec. 2024 to Feb. 2025, has been approved for the industrial, domestic, commercial and general services consumers of state distribution companies (discos) and K-Electric, the main utility in the port city of Karachi, “to enable optimum use of system generation capacity besides reducing gas demand due to shifting of favorabe demand toward electricity.”
“The ECC discussed the proposal and approved it, calling the subsidy-neutral interim relief initiative worked out by the Power Division as being timely and relevant in view of recent surge in electricity tariffs and the reduced demand across various consumer categories,” the finance division statement added.
The package would apply to incremental consumption over the past years and includes 18-50 percent discounts depending on various consumer categories and consumption slabs.
Incremental consumption will be calculated using a weighted average formula based on the last three years’ usage.
According to the power division, the base rate for domestic consumers is a minimum of Rs37.49 per unit and a maximum of Rs52.07 per unit, but additional consumption would be charged at Rs26.07 per unit for both categories. This would be 30 percent cheaper (Rs11.42 per unit) compared to a minimum rate of Rs37.49 and 50 percent (Rs26 per unit) compared to the maximum rate.
The energy ministry has previously said the move to slash winter tariffs will help industries reduce electricity costs by 7-8 percent at an optimal level, while stimulating industrial growth in the process.
