Latest news with #Binici
Express Tribune
28-03-2025
- Business
- Express Tribune
Govt seeks NEPRA's nod for Rs1.71 per unit cut in power tariff
Listen to article The federal government has approached the National Electric Power Regulatory Authority (NEPRA) for a reduction in electricity tariffs, following approval from the International Monetary Fund (IMF). The government has proposed a cut of Rs1.71 per unit in electricity prices, which would be facilitated through a tariff subsidy. The power regulatory authority is scheduled to hold a hearing on April 4, Express News reported on Friday. The proposed tariff reduction is intended to apply to all distribution companies, including K-Electric, with the subsidy set to take effect from April to June 2025. The move comes a day after the International Monetary Fund (IMF) said that Pakistan can reduce electricity prices by Rs1 per unit using revenues from the Rs791 per unit levy imposed on gas used in-house for power generation by industries – the only measure the government has secured thus far. This will lower electricity bills by 1.5%, but industries using gas to generate in-house power will have to pay 23% extra for gas to achieve this minimal reduction. Revenues from captive power plant firms can be used to reduce electricity prices by Rs1 per kilowatt, said Mahir Binici, the Resident Representative of the IMF, in a brief statement on Thursday. Binici made the statement a day after Pakistan and the IMF reached a staff-level agreement on the completion of the first review talks. Binici stated that the price reduction would benefit all consumers. However, the Islamabad High Court has already suspended the off-grid gas levy for at least five weeks. Pakistan and the IMF have reached a staff-level agreement for the $1 billion second loan tranche, but the timing of the IMF board meeting remains uncertain. The Rs1 per unit reduction suggests that the government and the IMF anticipate generating about Rs110 billion to Rs120 billion in revenues from the off-grid gas levy. Prime Minister Shehbaz Sharif has long aimed to reduce electricity prices by at least Rs6 to Rs8 per unit. However, the Power Division has yet to present a plan acceptable to the IMF that would result in a significant price cut. Pakistan has also been trying to convince the IMF to allow a reduction in electricity prices based on additional revenues from increased petroleum levies, reduced taxes, and downward revisions in fuel price adjustments and quarterly tariff adjustments. The IMF remains unwilling to lower taxes on electricity bills. It has also not yet communicated whether it will allow the government to use an additional Rs180 billion in revenues from the recent Rs10 per litre hike in the petroleum levy to reduce electricity prices.
Express Tribune
27-03-2025
- Business
- Express Tribune
IMF allows Rs1/unit cut in power tariff
Listen to article The International Monetary Fund (IMF) said on Thursday that Pakistan can reduce electricity prices by Rs1 per unit using revenues from the Rs791 per unit levy imposed on gas used in-house for power generation by industriesthe only measure the government has secured thus far. This will lower electricity bills by 1.5%, but industries using gas to generate in-house power will have to pay 23% extra for gas to achieve this minimal reduction. Revenues from captive power plant firms can be used to reduce electricity prices by Rs1 per kilowatt, said Mahir Binici, the Resident Representative of the IMF, in a brief statement on Thursday. Binici made the statement a day after Pakistan and the IMF reached a staff-level agreement on the completion of the first review talks. Binici stated that the price reduction would benefit all consumers. However, the Islamabad High Court has already suspended the off-grid gas levy for at least five weeks. Pakistan and the IMF have reached a staff-level agreement for the $1 billion second loan tranche, but the timing of the IMF board meeting remains uncertain. On March 7, the government notified a 23% increase in gas rates for industrial captive power plants (CPPs) by imposing a Rs791 per million British thermal unit (mmBtu) grid levy. The levy was introduced to discourage the use of gas for in-house electricity generation and push industries to shift to the national electricity grid. The Rs1 per unit reduction is negligible compared to the 23% additional burden placed on industries. Pakistan's 20 major textile export companies and chemical firms have taken the government to court over its decision to impose the levy to generate funds for reducing electricity prices. "Submissions made by the Council are worth consideration. Let notices be issued to the respondents for 30-04-2025 at the expense of the petitioners. The notification of March 7 shall remain suspended till the next date of hearing," stated the Islamabad High Court's March 26 decision. The Rs1 per unit reduction suggests that the government and the IMF anticipate generating about Rs110 billion to Rs120 billion in revenues from the off-grid gas levy. The petitioners have urged the court to declare the off-grid levy notification illegal and to rule the 'Off the Grid Captive Power Plants Levy Ordinance 2025' unconstitutional. They argued that they are already paying sales tax on the supply of natural gas and that imposing a double tax violates the Constitution. They also questioned why the levy was introduced through a Presidential Ordinance rather than an Act of Parliament. On the last day of talks, the Petroleum Division requested the IMF to reduce the new Rs791 per mmBtu grid levy by Rs250 to Rs300. The division proposed linking the levy to the average electricity price instead of peak-hour rates. However, the IMF rejected the government's request two weeks ago, insisting that higher rates were necessary to compel industries to abandon gas-fired in-house power generation and transition to the electricity grid. Following the levy's imposition, total gas prices for captive power plants have risen to Rs4,291 per mmBtu, as the government had previously increased gas rates for this category by Rs500 a few months ago. Gas prices are now even higher than imported LNG prices, a policy designed to push industries toward the national power grid. However, businesses remain reluctant to shift due to the exorbitant cost of grid electricity, which is driven by inefficiencies in the energy sector and flawed policies. According to the ordinance, the grid levy will increase by 10% in July 2025, followed by a 15% hike in February 2026 and another 20% by August 2026. This will bring the final price close to Rs6,000 per mmBtu, making gas usage even more costly and pushing industries toward the grid. However, with the matter now pending before the Islamabad High Court, complications may arise for both the IMF and the government. Prime Minister Shehbaz Sharif has long aimed to reduce electricity prices by at least Rs6 to Rs8 per unit. However, the Power Division has yet to present a plan acceptable to the IMF that would result in a significant price cut. Pakistan has also been trying to convince the IMF to allow a reduction in electricity prices based on additional revenues from increased petroleum levies, reduced taxes, and downward revisions in fuel price adjustments and quarterly tariff adjustments. The IMF remains unwilling to lower taxes on electricity bills. It has also not yet communicated whether it will allow the government to use an additional Rs180 billion in revenues from the recent Rs10 per litre hike in the petroleum levy to reduce electricity prices. Fuel and quarterly tariff adjustments are regular occurrences and may not require any formal announcement by the prime minister.
Express Tribune
28-01-2025
- Business
- Express Tribune
'Govt needs to be cautiously optimistic'
Listen to article ISLAMABAD: The International Monetary Fund (IMF) on Tuesday advised Pakistan to stay on course and show some patience amid growing demand from the private sector to open up the economy to create jobs and reduce unemployment. Pakistan "needs to stay on course, remain committed to programme objectives and at the same time needs to have a little bit of patience," remarked Mahir Binici, IMF Resident Representative in Pakistan. Binici was speaking during the "Dialogue on Economy", organised by the Pakistan Business Council (PBC). The resident representative, who recently took over, said that Pakistan had to be optimistic cautiously and had patience to stay on course in order to deliver on reforms so that people could benefit from that. The government has been facing increasing pressure from within and the business community to further ease monetary policy, open imports and let the economy grow. However, many voices are opposing such demands as the country is still passing through a phase of relative stability and its economic fundamentals are weak. Economic growth in the first quarter stood at only 0.92%, which was far lower than the optimism created by the government. "There is no automatic switch from stability to growth and we need to change the DNA of the economy to avoid any new balance of payments crisis after any new spurt of economic growth," said Finance Minister Muhammad Aurangzeb at another session during the dialogue. He did not promise any relief for the salaried class but admitted that "salaried persons were paying taxes disproportionate to their incomes". He appeared helpless in reducing tax rates, saying it was not possible until other sectors started paying their due share in taxes. Mahir Binici said that Pakistan's economic recovery had been in place and "we expect that the positive growth momentum will continue in this and the next fiscal year." Inflation has receded and a significant progress has been the improvement in the external sector. The SBP is building external buffers, Binici added. The finance minister anticipated a further cut in interest rate following the easing of inflation in January. He said that the Karachi Inter-bank Offered Rate (Kibor) was already trading below the 12% policy rate. The foreign exchange reserves of $13 billion by June this year would provide comfort to international credit rating agencies to improve Pakistan's rating to B, he projected. Mahir Binici said that unlike the typical IMF programmes that started with a crisis, the crisis situation and the stabilisation were already partially addressed during the last nine-month programme. The objective of the new programme was to maintain and cement economic stability with structural reforms, said the resident representative, adding that focus should be on reform agenda rather than achieving stability without adjustment. The objective is to have stronger, sustainable and more inclusive growth. Sustainable growth could be achieved through reducing distortions, ending state interventions and removing a variety of concessions, which would "enable us to have more resilient growth," said the IMF local head. Speaking at another session, Pakistan's former ambassador to the United States, United Kingdom and United Nations Dr Maleeha Lodhi said that without economic strength, Pakistan could not play a major role on the global front. Pakistan had to navigate its foreign policy challenges in a global geopolitical environment that was marked by five important features – growing multipolarity but weakening multilateralism, US-China competition, rising East-West tensions, increasing importance of middle powers and advanced technology, she added. She said that Pakistan could not be a middle power until it had economic strength and made technological advancements. There were six priority areas for Pakistan's foreign policy in the months and years ahead, said Lodhi. They are relations with China and the US, while avoiding getting into the crosshairs of their confrontation, although that might be easier said than done, dealing with an increasingly testy relationship with Afghanistan, managing the adversarial relationship with India, balancing ties between Saudi Arabia and Iran, and keeping relations with the EU on a positive track. She said that China remained Pakistan's top foreign policy priority. While relations remain strong, a number of problems need to be resolved. "China's three main concerns are lack of political stability in Pakistan, security of Chinese personnel working here and the public manner in which requests are made for loan rollovers and debt relief as this has implications for lending to other countries," she said. Regarding the US, Maleeha Lodhi said that the big unknown was how relations with Trump's America would shape up especially as Pakistan's geopolitical importance had diminished for Washington after its exit from Afghanistan. She said that America's top strategic priority was to contain China but Pakistan could not be part of any anti-China coalition. Another limiting factor is Washington's growing strategic and economic relationship with India, in a strategy to project Delhi as a counterweight to Beijing. "The challenge is to find space for Pak-US relationship between these two strategic realities. This will not be easy as Pakistan doesn't figure in Trump's foreign policy priorities," she added. With India, resumption of formal dialogue is not in sight but a backchannel is needed to manage tensions. At the moment, there is no framework for crisis management, said the former ambassador.
