Govt plans hike in petrol, gas, power prices under IMF deal

The federal government has made major assurances to the International Monetary Fund (IMF) and has decided to impose additional levies on petroleum products, a debt service surcharge on electricity bills, and an increase in gas prices, which will result in more financial burden on the public.

The federal government has prepared a plan to increase the prices of electricity, gas, and petrol at the beginning of the new fiscal year, under which the electricity tariff will be rebased annually from July 1, 2025. The gas tariff will be adjusted on July 1, 2025, and February 15, 2026, for which the government has given major assurances to the International Monetary Fund (IMF) before the new budget.

The public will have to be prepared to bear an additional financial burden in the budget for the fiscal year 2025-26, as it has been decided to impose a carbon levy of Rs 5 per liter on petrol and diesel, and the provinces will not provide any subsidy on electricity and gas.

To repay the circular debt, Rs 1,252 billion will be borrowed from banks, and this amount will be collected from electricity consumers over the next 6 years, and a 10 percent debt service surcharge will be added to electricity bills.

The government will have the authority to increase the debt service charge and reduce electricity subsidies in the new budget, as the target has been set to bring circular debt to zero by 2031.

NEPRA will continue to issue quarterly tariff adjustments, ensure timely implementation of fuel cost adjustments, and strive to close the gap in base tariff and revenue, and only targeted subsidies will be provided.

The circular debt management plan will be approved by the cabinet in July, while the energy sector benefited by Rs450 billion in the first half of the year, and by January 2025, the electricity circular debt had reached Rs2,444 billion, while by June 2024, the gas circular debt was recorded at Rs2,294 billion.

It has been decided to continue reforms to control circular debt, and through negotiations with IPPs, Rs348 billion will be paid by June, and energy prices will be reduced by improving cost recovery.