Understanding the Reasons Behind the Rising Electricity Tariffs in Pakistan
Electricity prices in Pakistan have been rising continuously, affecting households & businesses alike. Several important reasons explain why the cost of electricity is increasing. Let’s explore them in simple words:
1. Dependence on Imported Fuel
Pakistan generates a large portion of its electricity using imported fuels like oil, coal, and LNG (liquefied natural gas). When global prices for these fuels increase, the cost to produce electricity also rises — and consumers have to pay more.
2. Weak Pakistani Rupee
The value of the Pakistani Rupee has dropped against the US Dollar in recent years. Since fuel is imported in dollars, this makes it more expensive to buy, which again raises electricity generation costs.
3. IMF-Driven Reforms
Under agreements with the International Monetary Fund (IMF), Pakistan is required to reduce subsidies and charge more realistic prices for electricity. This means the government has to increase tariffs to cover actual costs.
4. Circular Debt Problem
There is a huge circular debt in the power sector over Rs. 2 trillion. This means energy companies don’t get paid on time, and to manage this financial pressure, the government raises electricity rates.
5. Fuel Price Adjustments (FPA)
Every month, electricity bills include extra charges called Fuel Price Adjustments. These are based on changes in global fuel costs. If fuel prices go up, these adjustments also increase your bill.
6. System Losses and Theft
Pakistan’s power system faces technical losses and electricity theft. These issues reduce efficiency and increase costs, which are then passed on to honest consumers through higher tariffs.
Conclusion
Rising electricity prices in Pakistan are caused by international fuel costs, currency devaluation, financial agreements, and internal system inefficiencies. Unless structural reforms and investments in renewable energy are made, power bills may continue to rise in the future.