Govt may withdraw free electricity, petrol benefits for officials to reduce financial pressure

The government is considering ending free electricity for officials, including bureaucrats, judges, and parliamentarians, to relieve the financial pressure on Pakistan’s struggling power sector.

This move is part of a broader emergency plan being developed by the federal government to address severe financial challenges and prevent a potential default.

The proposed plan could also involve removing free petrol benefits in the future. Given the country’s significant external debt and financial strain, these measures are seen as necessary for stabilising the economy.

 The plan includes providing electricity only to essential industries and businesses, and it also proposes reducing Maximum Demand Indicator (MDI) charges for factories.

Additionally, there may be a review of the performance of the National Electric Power Regulatory Authority (Nepra) and the Oil and Gas Regulatory Authority (Ogra).

The International Monetary Fund (IMF) has recently approved a $7 billion bailout for Pakistan but has raised concerns about high power theft and distribution losses, which contribute to the sector’s debt problems.

Power Minister Awaiz Leghari has stated that the government is working to cut “circular debt”—liabilities from subsidies and unpaid bills—by Rs100 billion annually through structural reforms

The power sector’s issues with theft and losses have led to increased debt and affected both poor and middle-class households. To meet IMF requirements, the government has raised power tariffs, which, despite record summer temperatures, has reduced household electricity consumption.

In December 2023, the government stopped providing free electricity to officers in Grade 17 and above in power generation, distribution, and management companies. These officers received a pay raise to compensate for the loss of this benefit.

This decision, made by the Cabinet Committee on Energy (CCoE) on October 26, 2023, was later approved by the federal cabinet.

Overall, the government’s potential actions aim to address the financial crisis in the power sector and ensure fiscal stability amidst ongoing economic pressures.