The federal government is planning to reduce the tariffs for electricity purchased from net metering consumers by Rs 17, sources have revealed. This move is part of a “power purchasing plan” shared with the International Monetary Fund (IMF) during its ongoing review mission.
Under the proposed plan, the government intends to purchase electricity from net metering consumers at a rate of up to Rs 10 per unit. Previously, electricity generated by net metering users was bought at Rs 27 per unit.
Net metering, the current system, allows consumers to offset their electricity bills by using solar power. In contrast, a proposed modification, gross metering, would involve selling all surplus energy back to the grid, potentially at a lower rate than the price consumers pay for electricity.
The IMF delegation is currently in Pakistan for the biannual review of the $7 billion bailout deal. If the talks are successful, Pakistan is set to receive a $1 billion tranche.
While experts have supported the use of solar panels, they caution that without reforms to the rooftop solar policy, the financial strain on the net metering system could balloon to Rs 503 billion over the next decade. This concern stems from a more than 10% decline in grid electricity demand, with major cities such as Lahore, Karachi, Islamabad, Faisalabad, and Peshawar, which account for 80% of net metering users, representing over 226,440 connections.
Meanwhile, sources have said the IMF has raised questions about how off-grid users will be addressed, but the government has yet to provide a clear plan. Negotiations regarding power companies are also ongoing, with the IMF urging the use of financial flexibility to reduce circular debt.
IMF Criticizes ‘Zero Tax’ on Captive Power Plants
The IMF has expressed dissatisfaction with the lack of gas tariffs for captive power plants. In response, the Petroleum Division has clarified to IMF officials that the tariffs will be “retroactively” enforced from January 1. However, IMF officials have raised concerns about potential legal challenges due to retroactive notifications, insisting that gas tariffs should be “notified immediately.”
The IMF has also directed the implementation of a grid transition levy for captive power plants and commended efforts to manage circular debt within the power sector.
Power Division’s Strategy for Circular Debt
The Power Division has shared its strategy with the IMF to eliminate circular debt, outlining plans to borrow Rs 1.2 trillion from banks, with Rs 300 billion to be settled. An additional Rs 600 billion would be cleared through waiving late payment surcharges.
The division also proposed a surcharge of Rs 2.8 per unit on electricity bills to repay the bank loans over five years. A new tax scheme for retailers, with fixed taxes, is also under consideration for the upcoming budget.
The IMF has demanded that the Federal Board of Revenue (FBR) complete its transformation plan swiftly and implement measures to control the illegal tobacco market.
