Islamabad, May 22, 2024: In a meeting held on Tuesday with representatives from the International Monetary Fund (IMF), Pakistani government officials unveiled a new solar power policy and provided details on initiatives aimed at revamping the country’s energy sector.
A key focus of the discussions was the high tax burden on electricity bills, which officials revealed amounts to a staggering Rs 800 billion annually, translating to an increase of Rs 8 per unit in electricity rates for consumers.
Addressing the IMF delegation, officials outlined plans to reduce this tax burden by Rs 100-200 billion per year, potentially lowering electricity rates by Rs 1-2 per unit. However, they acknowledged the inability to eliminate taxes entirely, emphasizing the need to broaden the tax base by targeting sectors such as retail, real estate, and agriculture.
The officials explained that while the 17% General Sales Tax (GST) on power bills, generating Rs 600 billion for the Federal Bureau of Revenue (FBR), cannot be removed, there is scope to eliminate additional taxes amounting to Rs 100-200 billion.
Prime Minister Shehbaz Sharif has been apprised of the detrimental impact of high electricity taxes on consumer rates, with officials stressing the urgent need for affordable electricity and highlighting the unsustainable and expensive nature of the current power system.
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In addition to the GST, consumers are burdened with various other taxes and surcharges, including Electricity Duty, PTV Licence Cost, Financing Cost Surcharge, Extra Tax, Further Tax, and Income Tax, depending on their consumption category.
As part of its efforts to restructure the system and increase efficiency, the government is exploring initiatives such as converting power facilities from imported coal to domestic Thar coal.
New Solar Policy and Gross Metering System
During the meeting, the IMF was informed about the government’s plans to transition from the current net metering system to a gross metering system for solar power. Under the new policy, the buyback price for solar-generated electricity will be reduced from the current Rs 21 per unit to Rs 7.5-11 per unit. Conversely, consumers will be charged Rs 60 per unit for electricity drawn from the national grid during peak hours or at night.
The gross metering system will measure the total amount of solar energy produced and exported to the grid using a unidirectional meter, with consumers paying the retail supply tariff for electricity consumed from the grid.
This adjustment aims to address the cost of storing solar energy for nighttime use and account for the declining prices of solar panels. Moreover, officials highlighted that the net metering system had already added 1938 MW of electricity to the system through rooftop solar panels, resulting in a revenue loss of Rs 100 billion and a subsequent price hike of Rs 1.90 per unit for consumers without solar panels.
As Pakistan grapples with its energy challenges, the government’s new solar power policy and initiatives unveiled during the IMF meeting signify a concerted effort to overhaul the sector, increase sustainability, and provide relief to consumers burdened by high electricity costs.
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