Pakistan's proposed power tariff reforms will drive up inflation by shifting IMF-mandated subsidy cuts onto middle-class households while delivering relief to industries, analysts predict.
The plan ends the cross-subsidy where businesses offset household bills, potentially adding 1.1 percentage points to inflation over 12 months, per Optimus Capital Management. Industrial prices could drop 13-15%, eliminating 102 billion rupees ($365 million) in subsidies, but middle-class power bills may rise 50%.
Inflation and Household Impact
Coming after 2023's near-40% inflation spike fueled by rupee weakness, fuel costs, and IMF reforms current 5.8% inflation faces renewed pressure. Consumers using 100-300 units monthly (most paying households) could see up to 76% hikes from new fixed charges; low-income 1-100 unit users jump from zero to PKR 400 fixed fee.
Energy expert Ahtasam Ahmad notes this compounds post-2022 inflation amid eroded purchasing power. Industrial groups argue high tariffs hurt textiles and exports.
Solar Policy Shifts Spark Debate
NEPRA slashed rates for rooftop solar exports, curbing a boom that eased emissions and bills but strained utilities amid falling grid demand. PM Shehbaz Sharif ordered a review to avoid shifting costs from 466,000 solar users to 37.6 million grid consumers. Arzachel warns high fixed charges could spur mass grid defection, threatening system stability.
