In a big respite to electricity consumers, Prime Minister Shehbaz Sharif will announce an Rs 8 per unit decrease in electricity prices on March 23 after the approval of the International Monetary Fund (IMF).

The lower tariff will be applicable from April 1, 2025, and consumers will get smaller electricity bills from May.

It is reported by the media that of the Rs 8 per unit decrease, Rs 4.73 per unit is a permanent change. This reduction has been made possible by cancelling deals with six Independent Power Producers (IPPs), restructuring the Power Purchase Agreements (PPAs) of 16 IPPs, bringing them under the 'Take and Pay' arrangement, and attaching Bagasse power plants to the Pakistani rupee rather than the US dollar.

Further, the return on equity (RoE) of government power plants (GPPs) has been slashed to 13%, with the dollar rate capped at Rs 168. The tariff decrease also takes into consideration the effect of the reduced prices of petroleum products, which fell in overseas markets on March 16, 2025.

Keeping fuel prices at existing levels is likely to cost an estimated Rs 168 billion, adding Rs 1.30 per unit cut in electricity prices. But this relief will be for just one month. If international fuel prices fall further, the cost impact could be Rs 250 billion.

Additionally, the Finance and Power Ministries are considering ways of cutting electricity costs by another Rs 2 per unit before the March 23 announcement. The government will make Rs 6 per unit out of the total Rs 8 per unit reduction a permanent cut.

In another major decision, the government has announced cutting the Rs 35 PTV charge from electricity bills from July 2025. To keep Pakistan Television (PTV) running smoothly, money will be kept separate in the 2026 budget.

This power tariff cut is a welcome relief for the public, who have been facing astronomical electricity bills and inflation.