Prime Minister Shehbaz Sharif has directed the Power Division to reduce electricity tariffs by Rs. 7 per unit for all consumer categories across Pakistan, including Karachi. The decision follows consultations with the International Monetary Fund (IMF), according to a report by Business Recorder.

The move comes as part of the government’s efforts to provide relief to consumers burdened by high electricity costs. To oversee the implementation, the prime minister has expanded the Tariff Reduction Committee, now led by Deputy Prime Minister and Foreign Minister Ishaq Dar. The committee is expected to finalize the tariff reduction plan by February 10, 2025, with implementation set to begin on April 1, 2025.

The proposed Rs. 7 per unit reduction will be achieved through multiple measures, including:

Revised agreements with independent power producers (IPPs) to save Rs. 2 per unit.
Elimination of federal and provincial taxes, reducing costs by Rs. 3 per unit.
Lowering the Return on Equity (RoE) for government-owned power projects.
Currently, taxes and surcharges account for 40% of electricity bills, amounting to Rs. 964 billion annually. Of this, Rs. 391 billion is contributed by the federal government, while Rs. 563 billion comes from provincial taxes. The Finance Division, however, has expressed concerns about removing these taxes, warning that it could impact fiscal targets and revenue collection under the IMF’s $7 billion bailout program.

In addition to the tariff reduction, the government has decided to halt legal proceedings against independent power producers (IPPs) accused of earning abnormal profits, as part of its broader strategy to stabilize the energy sector.