Pakistanis grappling with inflation received another blow as the National Electric Power Regulatory Authority (NEPRA) announced a massive hike in power tariff.

The new tariff translates to a hike of Rs 3.32 per unit, which will directly impact household and business budgets. This is likely to put a strain on many citizens already struggling with rising costs of essential goods.

The adjustment aims to account for fluctuations in fuel prices, which directly affect electricity generation costs. However, this increase comes at a challenging time for consumers, who are already facing rising prices for essential goods and services.

NEPRA’s notification outlines the specifics of the rate change, which will be reflected in upcoming electricity bills. The regulatory authority periodically reviews and adjusts electricity prices based on various factors, including changes in fuel costs.

Federal Cabinet

Earlier, federal cabinet had approved a substantial increase in the basic power tariff by PKR 5.72 per unit. This decision, made through a circulation summary, was forwarded to the National Electric Power Regulatory Authority (NEPRA) for uniform tariff implementation.

The Power Division submitted an application to NEPRA for the tariff hike, which is set to take effect on July 1, 2024, for the fiscal year 2024-2025. The average basic electricity tariff will rise from PKR 29.78 to PKR 35.50 per unit.

NEPRA's recent report highlighted a significant PKR 403 billion loss in Pakistan's power sector for the financial year 2022-2023. This loss was attributed to line losses and low recovery rates from nine power distribution companies, including K-Electric, which failed to achieve 100% recovery. The report also noted that these companies did not purchase electricity as per their assigned quotas, leading to deliberate load-shedding.

20% increase in national tariff

In June, NEPRA announced a nearly 20% increase in the uniform national tariff, aimed at securing approximately PKR 3.8 trillion in funding for the 10 ex-Wapda electricity distribution companies (Discos) for the fiscal year 2024-2025. This adjustment is expected to generate an additional PKR 485 billion in revenue for Discos, aiding the government in securing an IMF bailout scheduled for July.

NEPRA clarified that the government retains the authority to apply varying rates of increase across different consumer categories through cross-subsidies, ensuring the overall revenue requirements set by the regulator remain unaffected.