Electricity tariff revision in Jan 2027 may hike rates

Negotiations between the government’s economic team and the International Monetary Fund (IMF) are expected to take place next week, with energy-sector reforms and circular debt likely to feature prominently in the discussions.

Government officials are expected to brief the IMF on electricity reforms, privatization plans and measures to settle circular debt in the power and gas sectors.

Sources said the government has finalized tariffs for the competitive electricity market, although the auction process has not yet commenced.

The government has also issued notices inviting expressions of interest for the privatization of the Islamabad, Faisalabad and Multan electricity distribution companies.

According to sources, both local and foreign investors have expressed interest in acquiring electricity distribution companies, signaling potential private-sector participation in the power distribution system.

Power circular debt target set at Rs1.614tr

The government has set a target to cap the power sector’s circular debt at Rs1,614 billion as part of its efforts to address persistent financial pressures in the electricity sector.

A revision to the base electricity tariff is expected in January 2027, while a proposal is also under consideration to provide electricity subsidies to eligible consumers through the Income Support Program next year.

However, concerns remain that electricity tariffs could increase as the government moves toward full cost recovery and seeks to eliminate cross-subsidies.

Gas circular debt major challenge

The settlement of gas-sector circular debt, estimated at approximately Rs3,600 billion, remains a major challenge for the government, according to sources.

Gas prices could also rise under measures aimed at achieving full cost recovery for LNG and reviewing the existing gas slab system.

Issuing notifications for gas prices twice a year is among the conditions associated with the IMF programme.