In a briefing to the Council of Economic and Energy Journalists (CEEJ) in Karachi, the Sustainable Development Policy Institute (SDPI) revealed that inflation will occur in the US, and electricity prices will rise in Pakistan.

During the media briefing, SDPI research fellows Dr Khalid Waheed and Ahad Nazir explained that Independent Power Producers (IPPs) are charging Pakistanis based on the US inflation. The electricity agreements between the Government of Pakistan and IPPs are indexed to the US inflation.

Dr Khalid disclosed that the US inflation is also indexed in IPP tariffs, and even if the US dollar’s value decreases, electricity tariffs in Pakistan will still rise. He explained that due to US inflation, there was a 253% increase in tariff components from 2019 to 2024.

According to the data, in 2019, the capacity charges in Pakistan were Rs. 3.26 per unit. By 2024, the capacity charges had increased to Rs. 10.34 per unit. Along with US inflation, the impact of local inflation will also be included in the capacity charges, which the public will bear.

The briefing revealed that due to the increase in interest rates in the country, interest payments on electricity units have increased by 343% in four years. The working capital of IPPs has made electricity per unit 716% more expensive in four years. The electricity tariff includes 12 to 20% tax, while 70% of the cost is capacity charges.

Dr Khalid explained that Pakistan’s electricity generation capacity is 43,000 megawatts, while the transmission capacity is 23,000 megawatts. The impact of capacity charges on citizens will further increase due to solarization in the country. He mentioned that there is political gain in setting up power plants but not in laying transmission lines.