The government has prepared a comprehensive plan to raise electricity, gas, and petroleum prices from the beginning of the new fiscal year, sources revealed on Friday. The move comes as part of assurances reportedly given to the International Monetary Fund (IMF) ahead of the upcoming federal budget.

Sources told Aaj News that starting July 1, the electricity tariff will undergo an annual rebasing, while gas tariffs will be adjusted twice on July 1 and February 15, 2026. Additionally, a carbon levy of Rs5 per litre on petrol and diesel is also being finalised.

The government is expected to reduce subsidies on electricity in the upcoming budget. According to the sources, the public should brace for an additional financial burden. Added that provinces will not be allowed to provide subsidies on electricity and gas.

Sources further stated that a loan of Rs1,252 billion will be obtained from banks to settle circular debt, which will be recovered from power consumers over six years. To this end, a 10% debt service surcharge will be added to electricity bills, and the federal government will have the authority to revise this surcharge upward if necessary.

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A targeted subsidy model will be implemented, while a circular debt management plan is expected to be approved by the federal cabinet in July. The fuel cost adjustment will be applied in a timely manner, and quarterly tariff adjustments by NEPRA will continue.

Efforts are also underway to eliminate the base tariff and revenue gap, aiming to bring the power sector’s circular debt to zero by 2031. As of January 2025, electricity-related circular debt is projected to reach Rs2,444 billion, while gas circular debt has already hit Rs2,294 billion by June 2024.

The first half of the current fiscal year saw an estimated Rs450 billion benefit to the energy sector. Meanwhile, talks with Independent Power Producers (IPPs) are ongoing, with Rs348 billion expected to be paid by June. The government aims to improve cost recovery to help stabilise — and eventually reduce — energy prices.

Sources confirmed that these measures are part of broader reforms agreed upon with the IMF to ensure fiscal discipline and energy sector sustainability.

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