The Pakistani federal government is taking steps to address rising electricity costs by considering a significant increase of up to Rs. 5 per unit starting from July 1, 2023. The decision comes as power purchase payments are projected to exceed Rs. 3 trillion in the upcoming fiscal year.
Factors such as the decline in the value of the rupee, inadequate recovery by distribution companies (Discos), and the failure to meet targets set by NEPRA have contributed to circular debt exceeding Rs. 2.5 trillion.
To reduce circular debt, the government has made payments of nearly Rs. 300 billion during the current fiscal year. NEPRA is finalizing consumer-end tariff referencing for Discos, with over 90% of their revenue requirements determined by Power Purchase Agreements. The government aims to allocate Rs. 579.075 billion for electricity sector subsidies, representing a 27% increase from the previous fiscal year.