Electric shock

In yet another blow to the already burdened masses, the government approved a staggering increase in electricity prices, effective from July. The decision, which will see per unit prices rise by up to 51% or Rs7.12, disproportionately impacts lower-income groups. This hike is expected to extract an additional Rs580 billion from the pockets of 32.5 million consumers, primarily households. This increase comes amidst an economic landscape already marred by mismanagement and flawed energy policies over the past three decades. Notably, 26 million households, representing the poorest and low-middle-income groups, will bear the brunt of this price surge. Compounding the issue, the government has introduced fixed monthly charges for residential consumers, ranging from Rs200 to Rs1,000, a first in the nation’s history.

With the country’s circular debt hovering around Rs5.5 trillion, the move to raise electricity tariffs was a precondition set by the IMF for Pakistan to secure the next bailout package. The international lender has repeatedly urged successive governments to introduce power sector reforms, however, the incumbents have failed to do so and the price is being paid by an already over-burdened consumer. Capacity payments to IPPs, regardless of their generation output, add to the swelling circular debt with no headway made to renegotiate contracts made in decades past. The increase comes on top of heavy taxation already imposed, further straining household budgets. Discussions for privatising the energy sector have also taken place, where inefficiencies and corruption plagued the system. Privatisation could potentially bring in much-needed efficiency and accountability, but it also raises concerns about accessibility and affordability for the masses.

The steep increase in electricity prices underscores the urgent need for a comprehensive strategy to address the nation’s economic woes. The government must balance meeting IMF conditions with ensuring the welfare of its citizens. Without such a balance, the socioeconomic fabric of the country could face severe strain.