ISLAMABAD: The federal government has informed the International Monetary Fund (IMF) about a plan to recover more than Rs110 billion in outstanding power-sector dues from provincial governments by adjusting the amount against their shares under the National Finance Commission (NFC) award.
The proposal was discussed during recent talks with the IMF, which raised concerns about the potential financial impact of the recovery plan on provincial governments.
According to the government, more than Rs110 billion in provincial electricity dues have been reconciled, while nearly Rs50 billion could potentially be recovered in the near term.
The federal government has previously considered adjusting provincial power-sector arrears against their NFC shares, but provincial governments have opposed the move. The proposed deductions would also require the necessary authorisation from the provinces, as the State Bank of Pakistan cannot make such deductions from provincial accounts without proper approval.
The IMF has expressed concern that recovering the outstanding amount could put additional pressure on provincial finances. The provinces are already required to generate a combined cash surplus of Rs1.7 trillion and provide Rs1.036 trillion in cash grants to the federal government.
To meet these financial commitments, provincial governments have already reduced or adjusted development spending, increasing concerns over the impact of further deductions.
Smart Meters to Address Electricity Billing Disputes
The Power Division is also installing smart meters to help resolve disputes over electricity consumption and billing between the federal government and provincial authorities.
The smart-metering initiative is expected to provide more accurate information about electricity usage and help reduce disagreements over outstanding bills.
During the IMF discussions, officials also discussed the future of Pakistan’s uniform electricity tariff system.
Under the uniform tariff arrangement, consumers of different power distribution companies are charged according to a common tariff structure. This means customers of more efficient distribution companies may pay the same basic tariff as consumers served by less efficient companies.
The issue has become more important as Pakistan moves towards the privatisation of several power distribution companies. The government has yet to provide a clear position on whether the uniform tariff system will continue after privatisation.
K-Electric Dispute Also Discussed
The financial dispute between K-Electric and the federal government was also discussed during the IMF talks.
K-Electric has outstanding issues related to electricity purchases, tariffs and subsidy claims. The federal government is reportedly prepared to settle more than Rs100 billion in claims if the related tariff matters are resolved.
The National Electric Power Regulatory Authority (NEPRA) and its tribunal have rejected K-Electric’s request for a Rs40-per-unit tariff and approved a tariff of Rs32.37 per unit. The company is expected to challenge the decision in court.
Industrial Electricity Package Under Review
The IMF also sought clarification about the delayed review of the industrial incremental support package.
A hearing on the matter is scheduled for October 5, and the review could result in changes to the special electricity rates offered to eligible industries.
The package was introduced in December 2025 and offered a special tariff of Rs22.96 per unit to qualifying industries. The government had committed to reviewing the arrangement after six months, but the review has been delayed.
Industrial electricity costs have already increased by around 10% following tariff rebasing. Any further increase in incremental tariffs could add to the financial pressure faced by the industrial sector.
The proposed recovery of provincial power-sector dues therefore comes at a time when both federal and provincial governments are under pressure to improve financial management, control electricity-sector losses and meet commitments made under Pakistan’s IMF programme.
