Pakistan Reduces Winter Electricity Tariffs to Boost Consumption
Pakistan has announced a strategic move to increase electricity usage and reduce natural gas consumption for heating purposes by introducing discounts on electricity tariffs for the upcoming winter season. Energy Minister Awais Leghari stated in an interview on Saturday that this initiative will begin this winter and will include lower tariffs from December 2024 to February 2025.
This decision is expected to provide significant relief to both businesses and citizens, who are facing sharp increases in electricity costs due to energy sector reforms proposed by the International Monetary Fund (IMF). The IMF, which approved a $7 billion loan to Pakistan for 37 months in September, has not yet commented on this development.
The tariff reduction is expected to encourage an increase in electricity consumption during the winter months, a period that typically experiences a demand drop of up to 60% compared to the peak levels in summer. Public utility companies, which usually have to reduce or halt their operations due to decreased demand in the winter, are anticipated to benefit from this policy change.
Leghari emphasized that the aim of the price reduction is to boost demand, particularly since inefficient gas sources are commonly used for heating during the winter. Pakistan's reliance on expensive natural gas and wood burning for heating is well-known.
Despite an annual decline of 8-10% in electricity consumption over the last three quarters, the minister expressed optimism for an economic recovery that could offset these losses and lead to an average annual demand increase of 2.8% over the next decade.
Industries are expected to see a 7-8% reduction in optimal electricity costs due to the lowered tariffs, which could stimulate industrial growth. In addition to the winter tariff reductions, the government is also working on the rationalization of electricity tariffs, restructuring electricity sector debt, and reviewing tax structures on electricity bills.
Leghari also mentioned ongoing discussions with development partners regarding tax reductions to promote the growth of electric vehicles. This initiative is part of a broader strategy to combat air pollution and encourage the transition from combustion-based transportation to clean energy solutions.