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The ongoing campaign for the upcoming general election has been relatively subdued compared to previous ones. However, as momentum builds, a common slogan has emerged across various political parties.
Over the past two years, Pakistan has witnessed a significant surge in the cost of living, largely attributed to escalating fuel prices and a rapidly declining exchange rate. The deteriorating economy has particularly manifested in the escalating electricity prices, which ignited public outrage last August during nationwide demonstrations against unusually high bills.
In response to this public sentiment, both Bilawal Bhutto Zardari and Maryam Nawaz have pledged to provide free electricity to the less privileged sections of society. Bilawal proposed a limit of 300 free units, while Maryam initially suggested 200 units, later revised to 300 by her cousin Hamza.
Expert Rao Amir says cross subsidies may not work, adding that the government is already struggling to meet revenue collection targets, and introducing subsidies would further complicate the situation.
Currently, the country’s electricity consumers are divided into protected and unprotected categories. Protected consumers, using less than 200 units per month for at least six months, enjoy lower rates, with an additional ‘lifeline’ classification for those using less than 100 units.
However, a recent report by BBC Urdu suggests that the feasibility of the ‘300 free units’ slogan may be questionable. Experts quoted in the report, such as Mustafa Amjad from Renewables First, explain that issues like circular debt make the proposal unlikely to be implemented. Amjad highlights that providing free units would require the government to either pay companies to generate electricity or introduce a cross subsidy, but rising circular debt makes these options financially challenging for the government.
Rao Amir, another expert quoted in the report, emphasizes that cross subsidies may not work, given the industrial sector’s complaints about high tariffs. He adds that the government is already struggling to meet revenue collection targets, and introducing subsidies would further complicate the situation. Amir estimates that such a scheme could cost Rs700 billion, a financial burden the government cannot currently afford.
Economic journalist Shehbaz Rana, cited in the report, notes that two-thirds of Pakistani energy consumers use less than 300 units. Considering the government’s aim to collect Rs3,000 billion through bills, implementing the free unit scheme could cost the government Rs2,000 billion. Rana also suggests that the International Monetary Fund is unlikely to approve any government-proposed subsidies.