Impact on Islamabad’s Electricity Bills
ISLAMABAD: The Punjab government has taken immediate action to end the Rs14 per unit electricity subsidy for consumers in the Islamabad Capital Territory (ICT). This move aligns with the requirements set by the International Monetary Fund (IMF).
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Subsidy Withdrawal Details
Starting in September, ICT residents will no longer receive the Rs14 per unit subsidy on their electricity bills. This change was confirmed by a notification from the Islamabad Electricity Supply Company (IESCO), which will result in increased billing rates for Islamabad and surrounding areas.
Federal Government’s Price Increase
The federal government had previously raised electricity prices by up to 51% from July 1, as a condition for securing IMF loan approval. Despite this substantial increase, the loan has yet to be finalized.
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Official Confirmation from Punjab
Punjab Information Minister Azma Bukhari confirmed that the subsidy for ICT consumers has been withdrawn. According to her statement from September 3, 2024, the subsidy of Rs14 per unit for domestic single-phase consumers using between 201 and 500 units has been discontinued for ICT. However, this subsidy will still apply in Punjab until September 30.
Background and IMF Conditions
The Express Tribune reported on September 3 that the IMF had prohibited all provinces from offering any subsidies during the 37-month program and mandated the cessation of the Rs14 per unit subsidy by September 30. Punjab has opted to end the subsidy for ICT a month earlier than required.
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Political and Administrative Reactions
Bukhari noted that Punjab Chief Minister Maryam Nawaz Sharif had aimed to extend the subsidy to ICT consumers, but IMF constraints made this impossible. Despite this, the Punjab subsidy will continue for the province until the end of September. Prime Minister Shehbaz Sharif is reportedly working on additional relief measures.
Recent IMF and Government Developments
Last week, The Express Tribune revealed that the IMF had also rejected Pakistan’s plan to lower electricity prices by Rs6 per unit with a proposed Rs2.8 trillion funding scheme. The plan relied on unrealistic assumptions of raising Rs1.4 trillion from federating units and obtaining additional loans.
Implications for Lower-Income Consumers
The federal government has delayed the 51% increase in electricity prices for consumers using up to 200 units until October. This delay is temporary, and lower-income groups will face significant price hikes soon. Consumers in three provinces already bear high costs for consumption exceeding 200 units.
Financial Impact of the Subsidy Withdrawal
The Punjab government’s Rs14 per unit subsidy for August and September was intended for both provincial and ICT consumers using between 201 and 500 units. The subsidy’s estimated cost was reported at Rs90 billion, though Chief Minister Punjab suggested a lower figure of Rs45 billion.
The decision to end the subsidy for ICT consumers is expected to save several billion rupees. Conversely, the two-month subsidy for Punjab residents could cost around Rs60 billion.
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Future Outlook
The IMF’s new conditions also impact Punjab’s plan to distribute Rs700 billion worth of solar panels to consumers with monthly power consumption up to 500 units. Ongoing issues such as poor governance, high line losses, and elevated taxes have driven electricity costs to Rs64 to Rs76 per unit for residential and commercial users.
Rather than addressing these fundamental issues, both federal and provincial governments have opted for a short-term two-month subsidy plan, which fails to resolve the core problems within the electricity sector.
