The government is determined to reduce the electricity tariff for the export sector, despite facing objections from the International Monetary Fund (IMF).
Sources within the Ministry of Energy have confirmed that a detailed plan has been submitted to the IMF outlining the proposed reduction from 14 cents per unit to nine cents for the industrial sector.
- Previous attempts to reduce the tariff for the entire industrial sector in November 2023 were rejected by the IMF.
- This new plan specifically targets the export sector, aiming to eliminate the burden of cross-subsidies currently borne by exporters.
- Domestic consumers currently receive cheaper electricity at the expense of higher rates paid by industries, including those in the export sector.
Proposed Solution:
- The Energy Ministry has prepared a plan to supply electricity to the export sector at the lower rate of nine cents per unit.
- This plan reportedly tackles the issue of cross-subsidies, ensuring cost-efficiency and potentially boosting Pakistan’s export competitiveness.
IMF’s Stance:
- The IMF has previously objected to proposals for reduced electricity tariffs, citing concerns over fiscal sustainability and potential market distortions.
- It remains to be seen whether the IMF will approve the latest plan specifically targeting the export sector.
Significance:
- A reduction in electricity costs could provide a significant boost to Pakistan’s export sector, potentially leading to increased exports, job creation, and economic growth.
- However, securing IMF approval is crucial, as their financial support is vital for Pakistan’s economy.
Future Developments:
- The government awaits the IMF’s response to the proposed plan.
- Negotiations and potential adjustments might be necessary to secure IMF approval and move forward with the tariff reduction.
