ISLAMABAD – Rising electricity bills have become a significant concern for many Pakistanis, prompting widespread queries about the reasons behind these escalating costs. A deeper examination of a typical electricity bill reveals several contributing factors.
The composition of the electricity bill includes various taxes and fees such as sales tax, electricity duty, income tax, extra tax, further tax, retailer tax, and PTV fees. Residents of Karachi will soon have an additional burden as municipal taxes will also be included in their electricity bills.
Global economic factors play a substantial role in determining electricity prices in Pakistan. Inflation in the United States, for example, indirectly impacts electricity costs in Pakistan. Similarly, an increase in interest rates in London can lead to higher electricity prices domestically. This interconnectedness of global economies means that international financial trends significantly influence local utility costs.
Moreover, the agreements made with power plants in Pakistan stipulate conditions that result in higher electricity bills when the Pakistani rupee weakens against the US dollar. Higher interest rates in Pakistan also contribute to increased electricity costs. Additionally, fluctuations in the global market prices of oil, gas, and coal directly impact the cost of electricity generation, further driving up the bills.
Another hidden cost passed on to consumers is the interest payments made to power plants. Losses in electricity transmission and distribution also add to the final bill consumers pay. Notably, the financial burden of electricity theft in any region of Pakistan is distributed among consumers nationwide. Electricity theft is estimated to cost around 600 billion rupees annually.
Consumers also indirectly pay for the free electricity provided to certain individuals and entities, further inflating their bills. Despite paying high bills, consumers in areas with low recovery rates often suffer from load shedding. To cope with this, they must bear the additional costs of generators or UPS systems, as the load-shedding policy affects entire regions rather than targeting defaulters.
In the first week of July, the government announced a price hike of up to 28% across various slabs of electricity consumption. Following public criticism, the government granted a three-month exemption to consumers using up to 200 units of electricity. However, the future beyond this exemption period remains uncertain, leaving consumers anxious about further increases.
Understanding these multifaceted reasons helps explain why electricity bills in Pakistan are on the rise. Consumers should brace for potentially higher bills in the coming months as these factors continue to influence the cost of electricity.