As the political landscape gears up for the upcoming general election in Pakistan, a common slogan echoing promises of free electricity for the less fortunate has gained prominence across multiple parties. However, a recent report sheds light on the potential impracticality of such pledges amid economic challenges.
Over the last two years, Pakistan has witnessed a significant surge in the cost of living, primarily attributed to escalating fuel prices, a rapidly deteriorating exchange rate, and a noteworthy increase in electricity prices. Public outcry over exorbitant electricity bills reached its peak last August when nationwide demonstrations erupted.
Both Bilawal Bhutto Zardari and Maryam Nawaz, key political figures, pledged to provide free electricity to disadvantaged sections of society. Bilawal proposed a limit of 300 units, while Maryam initially mentioned 200 units, later revised to 300 units. However, a recent report by BBC Urdu suggests that implementing such promises might be challenging.
The country’s electricity consumers are divided into protected and unprotected categories based on their monthly consumption. Protected consumers, those using less than 200 units per month for at least six months, enjoy lower rates compared to their unprotected counterparts.
Experts quoted in the BBC Urdu report expressed skepticism about the feasibility of the ‘300 free units’ slogan. Mustafa Amjad from Renewables First outlined two potential approaches: the government could pay companies to generate the electricity or introduce a cross subsidy where higher consumption tiers subsidize those at the lower end. However, he emphasized that the rising circular debt poses a significant obstacle, as the government lacks the financial resources to support such initiatives.
Rao Amir, another expert cited in the report, argued that cross subsidies could exacerbate concerns in the industrial sector already grappling with higher tariffs. He pointed out the government’s challenges in meeting revenue collection targets and stressed that implementing such a scheme could cost a staggering Rs700 billion, a financial burden the government cannot afford.
Economic journalist Shehbaz Rana added that approximately two-thirds of all Pakistani energy consumers use less than 300 units. Considering the government’s goal of collecting Rs3,000 billion through bills, Rana estimated that the free unit scheme could cost a substantial Rs2,000 billion. Moreover, he noted that the International Monetary Fund (IMF) is unlikely to support any subsidies proposed by the government, adding another layer of complexity to these election promises.
