- Advertisement -
ISLAMABAD, Nov 24 (APP):A study conducted by the Pakistan Institute of Development Economics (PIDE) on Monday called for urgent reforms to restore fiscal sustainability and promote social fairness in the country’s power sector.
The new Knowledge Brief titled “Circular Debt and Electricity Tariffs: Unequal Burdens Across Household Quintiles in Pakistan” recommended applying the Debt Servicing Surcharge (DSS) and Tariff Rationalization Surcharge (TRS) only to high-consumption users (above 200 kWh per month), a PIDE news release said.
The brief further proposed shifting circular debt servicing to fiscal accounts as sovereign liabilities, linking DISCO subsidies to performance and loss-reduction targets, and expanding lifeline coverage to 100 kWh per month with dynamic targeting for low-income households.
Authored by PIDE Research Economist Dr Rubina Ilyas, the study noted that ongoing power sector challenges are adding to socioeconomic pressures, with lower-income households facing a relatively higher share of electricity costs. It highlights that circular debt – now exceeding Rs 2.6 trillion – has contributed to regressive electricity tariffs that disproportionately affect low-income families.
Despite Pakistan’s power generation capacity surpassing 45,000 MW by mid-2025, the sector remained fiscally strained. The study pointed out that Power Distribution Companies (DISCOs) continued to report 16–17 percent transmission and distribution losses, while bill recovery ranged from 95 percent in IESCO and LESCO to as low as 60 percent in PESCO and QESCO.
The brief noted that the average national tariff has nearly tripled, rising from Rs12.5 per kilowatt-hour (kWh) in 2015 to Rs34.45/kWh in 2025. Of this, 30–35 percent comprised non-energy financial adjustments, including debt repayments and surcharges. “Every rupee of circular debt is being passed on to consumers through uniform surcharges, effectively making the poor pay for inefficiencies they did not create,” Dr Rubina observed.
For the lowest income quintile, consuming up to 100 kWh per month, the tariff has increased from Rs11.72/kWh in 2018 to Rs22.44/kWh in 2025, with nearly 37 percent attributed to circular-debt-related surcharges. Middle-income households (Q3), consuming around 250–300 kWh per month, now face effective tariffs of Rs34.2/kWh, while higher-income users (Q5), consuming more than 700 kWh per month, pay Rs46.5/kWh.
However, the study noted that the share of non-energy costs within total bills declines from 60 percent for the poorest households to 30 percent for the richest, underscoring the regressive nature of the current tariff recovery structure.
The findings also showed that the poorest 40 percent of households (Q1–Q2) pay around 55–60 percent of the total Debt Servicing Surcharge, despite earning less than 30 percent of national income.
In contrast, the top income quintile, which earned nearly 45 percent of total income, contributed only 15–20 percent of the DSS, it added.