Pakistan’s proposed changes to electricity prices are expected to raise inflation and shift the burden of IMF-mandated subsidy cuts onto middle-class households, analysts have warned. The plan aims to end a system where industrial users subsidise residential energy bills.
According to Optimus Capital Management, the move could push inflation up by 1.1 percentage points over the next year. Industrial electricity prices, meanwhile, are likely to fall by 13 to 15 percent, removing around Rs102 billion ($365 million) in subsidies.
For households, the impact will be significant. Analysts estimate that middle-class consumers could see their electricity bills rise by about 50 percent. Those using between 100 and 300 units of power per month, which accounts for most residential users, may face rate hikes of up to 76 percent because of new fixed charges, according to Arzachel, a Karachi-based energy consultancy.
Low-income households are also affected. NEPRA, the National Electric Power Regulatory Authority, said on Monday that fixed charges for homes using up to 100 units monthly will increase to Rs400 from zero.
Inflation and energy pressures
Pakistan experienced one of the highest inflation surges in Asia in 2023, with prices rising close to 40 percent. The spike was driven by a weakening rupee, rising fuel costs, and IMF-backed reforms. Inflation has since eased to 5.8 percent, but experts warn the new electricity pricing could add pressure on household budgets.
Ahtasam Ahmad, Energy Finance Program Lead at consultancy Renewables First, said the changes “add to the compounding effect of inflation which we have experienced post-2022,” noting that purchasing power for the average household has declined significantly.
The proposed overhaul reflects ongoing tensions within Pakistan’s IMF programme, which has called for steep utility price increases since 2023 to support struggling state power firms. Industrial groups argue that high electricity costs hurt the competitiveness of sectors such as textiles and manufacturing.
Rooftop solar changes spark debate
The pricing plan also affects solar energy users. NEPRA has cut the rate paid to households that export rooftop solar electricity to the grid, replacing a system that previously valued supplied and purchased electricity equally.
While rooftop solar growth has lowered bills and reduced emissions for some households, it has also reduced revenues for utilities already struggling with debt. Prime Minister Shehbaz Sharif on Wednesday ordered a review of the changes, directing officials to ensure that costs are not shifted from 466,000 solar users to 37.6 million grid consumers.
Arzachel warned that “excessively high fixed charges risk driving consumers toward full grid defection, undermining long-term system stability.”
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