Gas, Electricity, Oil Prices to Increase in Budget 2025 to Meet IMF Conditions

The government plans to increase the prices of gas, electricity, and petroleum products in the upcoming budget 2025 to fulfill key conditions agreed upon with the International Monetary Fund (IMF), as per reports.

Official documents reveal that electricity tariffs will be revised through annual rebasing starting July 1, 2025, while gas prices will be adjusted twice—on July 1, 2025, and again on February 15, 2026. Additionally, a carbon levy of Rs 5 per litre will be imposed on both petrol and diesel beginning July 1. Under the agreed framework, provincial governments will not be allowed to offer subsidies on electricity or gas.

To address the growing circular debt in the energy sector, the government will borrow Rs 1,252 billion from banks, which will be recovered from electricity consumers over a six-year period. A 10 percent debt servicing surcharge will be imposed for this purpose. Should the collected amount fall short, the government will retain the authority to raise the surcharge rate.

The upcoming budget 2025 will also see a reduction in electricity subsidies, with a goal to eliminate circular debt entirely by 2031. NEPRA will continue to issue quarterly tariff adjustment notifications, and monthly fuel cost adjustments will be implemented regularly.

The difference between the base tariff and actual revenue requirements will be eliminated. However, the government has pledged that low-income and vulnerable consumers will be protected through targeted subsidies, avoiding any additional burden on them.

A revised circular debt management plan is set to be introduced in July, pending cabinet approval. As of January 2025, circular debt in the electricity sector stood at Rs 2,444 billion, while debt in the gas sector was recorded at Rs 2,294 billion as of June 2024. Reforms will continue to address and control this mounting debt.

The documents also indicate that steps will be taken to improve cost recovery in order to eventually lower energy prices. Furthermore, outstanding dues amounting to Rs 348 billion will be resolved through negotiations with Independent Power Producers (IPPs) by June.

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