Khashif Talks Unlock Knowledge & Explore with Khashif Talks!
Government Withdraws Energy Subsidies
In a bold move, the government has announced the withdrawal of all subsidies on electricity and gas. This applies to federal and provincial subsidies and is a part of efforts to address the ongoing circular debt crisis in Pakistan’s energy sector. The International Monetary Fund (IMF) has been informed about the new measures aimed at stabilizing the economy.
Circular Debt Crisis Reaches Rs4.8 Trillion
Pakistan’s energy sector has accumulated an unsustainable circular debt of Rs4.88 trillion. The electricity sector alone accounts for Rs2.794 trillion, while the gas sector adds another Rs2.083 trillion as of early 2024. This mounting debt has become a significant burden on the national economy.
To counter this, the government plans to raise gas tariffs starting February 15, 2025. Additionally, it will halt gas supply to captive power plants by January 2025, further aligning energy tariffs with production costs.
Energy Tariffs to Reflect Production Costs
The government has committed to collecting the full cost of electricity and gas production from consumers. This marks a shift away from the long-standing practice of providing subsidies. The new policy includes regular adjustments to energy tariffs to prevent the accumulation of further debt.
Gas Tariff Hikes and Privatization Plans
In line with the plan, the Ministry of Finance will notify gas tariff increases by February 2025. The government will also implement other reforms, including the privatization of electricity distribution companies.
In addition, efforts will be made to reduce line losses and improve the overall efficiency of energy distribution networks. These steps aim to make the energy supply more sustainable and cost-effective, preventing the circular debt from spiraling further out of control.
