The federal government has finalized a broad plan to increase the prices of electricity, gas, and petroleum products in the upcoming fiscal year, fulfilling key commitments made to the International Monetary Fund (IMF) ahead of the 2025–26 budget.
An official document reveals that beginning July 1, 2025, consumers should expect a significant rise in energy costs due to tariff revisions across the sector.
The plan outlines annual rebasing of electricity tariffs and biannual adjustments in gas prices. Gas tariffs will be revised on July 1, 2025, and again on February 15, 2026. Additionally, a carbon levy of Rs 5 per litre will be introduced on petrol and diesel from July 1.
The document further mentions that provincial governments will stop offering subsidies on electricity and gas.
To tackle the mounting circular debt in the energy sector, the government will acquire a bank loan of Rs 1,252 billion. This amount will be recovered from electricity consumers over a six-year period through a 10 percent debt servicing surcharge. If the revenue falls short, the surcharge rate may be increased.
The plan also includes a gradual reduction in electricity subsidies, with the goal of eliminating circular debt repayments by 2031. The National Electric Power Regulatory Authority (NEPRA) will continue to issue quarterly tariff adjustments, while monthly fuel price revisions will be implemented on schedule.
The government has committed to shielding low-income and vulnerable groups from further tariff hikes. Instead, targeted subsidies will be provided to support those most affected.
A new circular debt management strategy is expected to be unveiled in July following cabinet approval. Officials noted that the first half of the current fiscal year saw a benefit of Rs 450 billion due to reduced energy costs and improved recovery efforts.
As of January 2025, the circular debt in the power sector had reached Rs 2,444 billion, while the gas sector’s circular debt stood at Rs 2,294 billion as of June 2024. The government reaffirmed its resolve to pursue reforms aimed at curbing the circular debt crisis.
To improve cost recovery, authorities are negotiating with Independent Power Producers (IPPs) to clear outstanding dues amounting to Rs 348 billion by June. These efforts are part of a broader strategy to eventually stabilize and lower energy prices.
