Islamabad pushes industrial power relief as Discos seek 400 percent security-deposit hike

State-owned power distribution companies (Discos) have asked for substantial security deposit increases, which they want to raise by more than 400 percent for all consumers. As per reports, however, Islamabad is pushing for low industrial power rates and to ‘rationalise’ the tax burden on the salaried class.

Power companies have petitioned the National Electric Power Regulatory Authority (NEPRA) to raise security deposits substantially for customers in lower consumption categories. The proposed changes would base deposit amounts on asset values because electricity rates have risen by a staggering 300 percent since 2008.

The proposed per-kilowatt deposit increase from 1220 rupees to 5179 rupees would significantly raise upfront costs for consumers who need new connections, reconnections, or wish to change their tariff category.

During a Pakistan Business Council (PBC) event, Power Minister Awais Ahmad Khan Leghari revealed that multiple power projects had been launched without following the least-cost principle. According to reports, the government intend to tackle this issue by halting the purchase of electricity from new power plants starting in April while also hosting auctions to sell excess capacity.

The power ministry proposed industrial users pay electricity rates based on marginal costs and additional discounts for Greenfield projects, including data centres and IT businesses. The transition to a competitive electricity market will start in April and should fully implement itself within two to three years.

In order to combat the growing circular debt, Awais Leghari said that the government would conduct a review of tariffs surrounding nuclear power and hydropower facilities. According to him, industrial tariffs have declined by 11 rupees already, and more reductions could follow if Pakistan successfully negotiates better terms for the energy debt held by China.

The minister states that establishing a single national electricity rate is impossible because Pakistan needs to advance its privatisation efforts. Reports indicate that eight out of ten DISCOS will transition to private management during the following two to three years.

Finance Minister Muhammad Aurangzeb, also present at the PBC event, declared that salaried people face extortionate taxes, which require immediate easing. Reports suggest that tax slab modifications face uncertainty because of Pakistan's ongoing International Monetary Fund (IMF) program however, officials are working to simplify the tax filing system. He outlined how Islamabad aims to eliminate the need for tax consultants by developing simpler procedures for tax compliance.

Muhammad Aurangzeb expects that policy rates will continue to decrease because inflation is projecting a downward trend. Data shows that large businesses have obtained financing at rates below 11 percent while foreign exchange reserves now stand at $13 billion.

The current level of reserves provides three months of import protection, which is better than what analysts had predicted earlier based on old reserve amounts. He emphasised that these advancements create essential conditions for Pakistan's credit rating improvement.