July 2024 Tariff Rebasing and the Limits of Price-Only Reform

Pakistan notified its FY2024-25 electricity tariff rebasing on 14 July 2024, two days after IMF staff announced a staff-level agreement on a 37-month Extended Fund Facility of about USD 7 billion. The two are linked. The IMF statement listed "timely adjustment of energy tariffs, decisive cost-reducing reforms, and refraining from further unnecessary expansion of generation capacity" among the programme's goals. NEPRA's decision of 11 July, on the federal government's motion, sets out the numbers. The total revenue requirement for distribution companies in FY2024-25 is Rs3,768 billion, up from Rs3,281 billion.

The average base tariff rises 19.2 per cent (35.50 divided by 29.78). Most of this rebasing pays for plants whether or not they run. The category table in NEPRA's decision is more revealing than the average. The NEPRA-determined average residential tariff rises from Rs26.06 to Rs35.24 per unit, an increase of Rs9.18, or about 35 per cent on our calculation. It is also a timing device: the full rate arrives in October, after the peak cooling bills. We think the rebasing was necessary and that it should be judged by what follows, since it buys time without changing costs.