The recent surge in electricity prices has emerged as one of the most pressing challenges for Pakistan, impacting everyone from industrialists to ordinary citizens. This dramatic increase in costs has not only strained household budgets but also posed a significant threat to the country’s industrial sector. The middle class, once relatively insulated from such economic shocks, now finds itself grappling with soaring electricity bills, a burden that has increasingly affected even the upper-middle class and wealthy segments of society. The situation has become so dire that some industries have been forced to shut down, leading to job losses and pushing more people below the poverty line. The escalating cost of electricity has also contributed to a worrying rise in the rate of civilian deaths, a stark indicator of the broader socio-economic crisis facing the nation.
The root cause of this crisis lies in the high cost of electricity production under the agreements with Independent Power Producers (IPPs). These agreements have resulted in a per-unit cost of electricity in Pakistan reaching an alarming Rs 60, while in other South Asian countries, the cost remains as low as Rs 18 per unit. This discrepancy has made electricity unaffordable for a vast majority of Pakistanis, exacerbating the economic woes of the nation. On one hand, the government is paying large sums of money to the IPPs, while on the other, it continues to offer free electricity and petrol to the elite, further burdening the common man. The current system is unsustainable, with the government losing hundreds of billions of rupees due to incompetence and misrepresentation in the power sector.
The introduction of a committee to address the issues surrounding IPPs and the provision of free electricity is a step in the right direction, but it is insufficient to alleviate the concerns of the general public. The government must take decisive action by issuing a formal order to end the practice of free electricity and petrol for the elite. Until such measures are implemented, the common man will continue to bear the brunt of this economic imbalance. The current administration, in power since 2022, has frequently spoken about austerity and reducing government expenditure, yet these promises have largely remained unfulfilled. The government’s failure to act on these issues has only deepened public frustration and distrust.
The need for urgent action is further highlighted by the government’s decision to impose additional taxes on exports in the recent budget, coupled with the sharp rise in electricity prices. This has cast doubt on the government’s ability to achieve its ambitious export targets, which aim to double exports from $30 billion to $60 billion in three years. The disconnect between these targets and the current economic policies suggests that the government may not be fully cognizant of the challenges facing the industrial sector. Without addressing the underlying issues, such as the exorbitant cost of electricity, these export targets are unlikely to be met.
Moreover, Pakistan’s economic struggles are compounded by a sharp decline in the tax-to-GDP ratio, which has fallen below 9 percent. The government’s reliance on taxing salaried classes and industries, while neglecting other sectors, has contributed to this decline. However, the recent move to implement an agricultural income tax is a positive development that could generate up to 1500 billion rupees in revenue. This tax is a critical step towards broadening the tax base and ensuring that all sectors of the economy contribute their fair share.
The federal government, responding to growing public and political pressure, has finally decided to end the free electricity facility provided to government and semi-government institutions, as well as to government officials. This move is long overdue and should have been implemented much earlier. The Public Accounts Committee had directed top government officials to end this facility as far back as March 2022, yet the matter was repeatedly postponed. The committee’s recommendations were ignored, leading to the continued wastage of public funds. According to documents presented in parliament in March 2023, government employees from grade 1 to 16 use 33 crore units of free electricity per month, while employees from grade 17 to 21 consume an additional 70 lakh units per month. This totals more than 34 crore units of free electricity annually, at a cost of over 9 billion rupees.
In a country facing severe financial challenges, where taxes are being levied on necessities such as flour, ghee, and children’s milk, there is no justification for spending billions of rupees on providing free electricity and petrol to government employees. If the decision to end these privileges had been taken two years ago, significant savings could have been made, easing the burden on the national economy. Therefore, it is imperative that the government implements this decision without further delay and abolishes the free electricity facility entirely.
