Govt to Raise Power, Gas, & Fuel Prices from July to Meet IMF Conditions
News Desk
Islamabad: In a significant policy shift aligned with its commitments to the International Monetary Fund (IMF), the government has finalized a comprehensive plan to raise electricity, gas, and petroleum prices in the upcoming fiscal year starting July 1, 2025.
The move is aimed at addressing long-standing structural issues in the energy sector, particularly the ballooning circular debt.
According to an official document, consumers should prepare for a substantial financial impact as the government proceeds with wide-ranging energy tariff reforms. These include annual rebasing of electricity prices, biannual gas tariff adjustments, and the introduction of a carbon levy.
Beginning July 1, 2025, electricity tariffs will be revised annually, while gas prices will see adjustments twice — on July 1, 2025, and February 15, 2026. In a major policy step, a carbon levy of Rs 5 per litre will be imposed on petrol and diesel from July 1, with provincial governments also withdrawing their electricity and gas subsidies.
To address the massive circular debt plaguing the energy sector, the government will borrow Rs 1,252 billion from commercial banks. This loan will be recovered from consumers over the next six years through a 10 percent debt servicing surcharge on electricity bills. Authorities may raise the surcharge rate if revenue collection falls short.
The circular debt management strategy also includes a significant reduction in energy subsidies, aiming to bring repayments to zero by 2031. NEPRA will continue to notify quarterly tariff revisions, while monthly fuel price adjustments will be implemented more efficiently.
The government claims that the financial burden will not fall on low-income or vulnerable segments. Instead, targeted subsidies will be offered to protect these groups from the impact of rising energy costs.
As of January 2025, the circular debt in the power sector had reached Rs 2,444 billion, while gas sector debt was recorded at Rs 2,294 billion by June 2024. However, officials noted that energy cost reductions and improved recovery efforts yielded a benefit of Rs 450 billion in the first half of the current fiscal year.
To further stabilize the sector, the government is negotiating with Independent Power Producers (IPPs) to clear Rs 348 billion in outstanding arrears by June. The full circular debt management plan is expected to be formally announced after cabinet approval in July.
Authorities emphasize that while these measures will temporarily increase the cost burden on consumers, they are crucial steps toward long-term stability and eventual price reductions in the energy sector.
