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Sunday, October 6, 2024

Punjab Ends Electricity Subsidy for ICT

The Punjab government, under IMF pressure, has withdrawn a Rs 14 per unit electricity subsidy for Islamabad, increasing costs for consumers and highlighting broader economic challenges and commitments under the IMF program.

The Punjab government has withdrawn the Rs 14 per unit electricity subsidy for Islamabad Capital Territory (ICT) consumers following directives from the International Monetary Fund (IMF). Effective immediately, this decision impacts electricity bills for September, leaving residents of Islamabad and its adjoining areas facing higher rates. The federal government had already raised electricity prices by up to 51% from July 1 to comply with IMF conditions, although loan approval is still pending.

Punjab Information Minister Azma Bukhari confirmed that the subsidy, which was previously provided to residential consumers using between 201 and 500 units, would no longer apply in Islamabad. “The subsidy will continue for Punjab consumers till September 30,” Bukhari added. Despite the efforts of Punjab Chief Minister Maryam Nawaz Sharif to extend the relief to Islamabad, the agreement with the IMF prevented this.

Economic Challenges and IMF Conditions

The IMF’s conditions have further restricted the Pakistani government’s ability to offer subsidies. Recently, it was reported that the IMF rejected Pakistan’s proposal to cut electricity prices by Rs 6 per unit, which relied on unrealistic revenue projections. The federal government also delayed a separate increase of up to 51% in electricity prices for consumers using up to 200 units until October. This decision will expire soon, and low-income households will face another price hike.

The withdrawal of the subsidy in Islamabad is expected to save the government a few billion rupees. However, the provincial government will still bear an estimated cost of around Rs 60 billion for providing two months of relief to Punjab consumers. The subsidy scheme for Punjab, approved in August and September, covers consumers using between 201 and 500 units. The provincial finance minister initially estimated the subsidy’s cost at Rs 90 billion, but the final figure was reduced to Rs 45 billion.

Read More: Electricity Price Hike Sparks Economic Concerns in Pakistan

Implications of the Withdrawal

Following Punjab’s decision to introduce the subsidy, the IMF introduced additional terms, prohibiting provincial governments from implementing policies that might conflict with commitments under the $7 billion program. These new conditions could also affect Punjab’s plan to allocate Rs 700 billion for solar panel installations for consumers with a monthly usage of up to 500 units.

Due to governance challenges, high line losses, increased taxes, and expensive agreements, electricity prices have become unaffordable for many Pakistani households. Prices now range between Rs 64 and Rs 76 per unit for residential and commercial consumers, straining both the federal and provincial governments to provide temporary relief through subsidies.

As Pakistan navigates its commitments under the IMF program, consumers in Islamabad and beyond brace for a challenging period of economic adjustments and rising costs.