IMF rejects subsidised power tariffs proposal
ISLAMABAD: The International Monetary Fund (IMF) has rejected Pakistan’s proposal to offer subsidised electricity tariffs to crypto mining and certain industrial sectors, warning that such moves would create new complications in the already strained power sector.
Testifying before the Senate Standing Committee on Power, chaired by Senator Mohsin Aziz, Secretary Power Dr Fakhray Alam Irfan stated that all major power sector initiatives must be cleared by the IMF. He noted that although Pakistan has surplus electricity, particularly in winter months, the IMF is cautious about any pricing mechanisms that could distort the market.
In September 2024, the Power Division proposed a six-month incremental consumption package (October–March) at marginal cost (Rs 23/kWh), based on last year’s usage. However, after two months of discussion, the IMF only approved a three-month version, citing potential market distortions.
In a subsequent plan shared in November 2024, the Power Division suggested a targeted marginal cost-based package (Rs 22–23/kWh) for energy-intensive industries such as copper and aluminium melting, data centers, and crypto mining, arguing it would boost consumption of surplus electricity and reduce capacity charges. Still, the IMF rejected the proposal, stating it resembled sector-specific tax holidays that have historically created imbalances.
“As of now, the IMF has not agreed,” Dr Irfan confirmed, adding that the plan is also under review by the World Bank and other development partners. He emphasised that the government has not withdrawn the proposal and remains engaged with international institutions to refine it.
During the session, a heated debate also emerged on the government’s recent agreement with scheduled banks to reduce the circular debt stock of Rs 1.275 trillion.
Senator Shibli Faraz criticised the deal, stating that banks were “forced at gunpoint” to offer the loans. “If I were a banker, I would have refused,” he said, warning that the burden would fall on consumers through future levies.
Secretary Power rebutted this claim, clarifying that no new levies have been imposed. He stated that the existing Debt Servicing Surcharge (DSS) of Rs 3.23/kWh will continue for the next five to six years to recover the amount. He also highlighted that circular debt inflows have been reduced through timely subsidy injections. On consumer facilitation, Dr Irfan reported that over 500,000 people have downloaded the “Apna Meter Apni Reading” app, allowing users to upload photos of their meter readings to potentially reduce inflated billing. He said the app will soon be extended to K-Electric (KE) users.
The committee also expressed displeasure over the absence of the Federal Minister for Power, who was expected to answer questions on Independent Power Producers (IPPs) and sectoral inefficiencies.
Senator Mohsin Aziz said the establishment of certain IPPs was an injustice and questioned why excess profits have not been recovered.
Senator Shibli Faraz alleged that inflated project costs were used to justify higher returns, adding that no real steps have been taken to curb the circular debt crisis. “The public is bearing the burden of government inefficiencies,” he said.
Senators raised concerns about forced load shedding, especially in areas like Tharparkar, Matiari, and Umerkot, where daily outages last up to 14 hours, despite consumers paying their bills.
Senator Poojo Bheel accused local officials of corruption, claiming they take bribes for illegal connections and restore disconnected supplies for a ‘fee’. He emphasised that even paying customers are facing denial of their rights due to systemic failure.
In response, Dr Irfan explained that revenue-based load shedding occurs in areas with losses exceeding 20%, citing a tragic case where a SEPCO employee was fatally stabbed during a disconnection drive.
KE’s Chief Distribution Officer Sadia Dada said that out of 2,100 feeders, about 30% face load shedding due to high electricity theft, often through Kundas (illegal hooks) in informal settlements. She said consumer bills are now offered in instalments to ease payment difficulties.
Dr Irfan stated that 58% of consumers fall under the “protected” category, paying Rs 10 per unit. With the approval of international partners, the government will allocate Rs 250 billion in subsidies, while also rolling out more tech-based solutions for theft control. So far, 500,000 people have downloaded the meter reading app, with 250,000 registered users.
Senator Haji Hidayatullah raised an over-billing case involving a Rs 2.3 million charge on a property in Peshawar that had already been cleared by PESCO. He claimed PESCO officials offered to settle the bill for Rs 300,000, calling it blatant corruption. The Secretary Power assured that the matter will be investigated.
The CEO of HAZECO also briefed the committee on issues in Sub-Division Lora Chowk, including estimated billing, feeder faults, and pending ELR work under release numbers 46241, 51911, and 51910.
Following extensive deliberations, the committee expressed displeasure at the Power Division’s repeated deflection of questions and directed the department to submit comprehensive answers at the next meeting. —MUSHTAQ GHUMAN
