Electricity Bills to Drop as Government Removes Duty Charges

For millions across Pakistan, opening a monthly electricity bill feels like facing a firing squad. Each line item is a blow. Tariffs. Duties. Taxes. Service charges. You stare at numbers that barely make sense. And with every added rupee, your burden grows. But this time, there’s a shift. Something’s finally been cut—and it’s not your power. The electricity duty is a long-standing fee that adds 1% to 3% on top of every unit consumed.

From July 1, 2025, the federal government will stop collecting this duty through electricity bills. It’s a move aimed at clarity, relief, and reform. In a country where electricity theft eats up Rs. 500 billion annually and bills confuse more than they inform, this step brings hope to families and businesses who feel left behind.

Let’s explain what’s changing, why it matters, and what to expect next.

What Was The Electricity Duty, And Who Paid It?

Electricity Duty (ED) wasn’t just a random tax. It was a provincial charge under Section 13 of the West Pakistan Finance Act, 1964,

“which allowed provincial governments to charge a small tax, called Electricity Duty, on the use or production of electricity.”

Every time you flipped a switch, this small percentage quietly climbed onto your bill.

Here’s how it worked:

• Domestic and Commercial users paid 1.5% on each unit.
• Industrial users paid 1.0%.
• Self-generators using over 500 KVA are paid 3 paisa/unit.

That doesn’t sound like much, right? But over months and years, that fee stacked up. With rising unit prices and added charges, even minor duties felt like a blow. For someone already paying Rs. 25,000 per month, a 1.5% levy meant Rs. 375 extra, every month.

Why Did the Government End It?

Federal Energy Minister Awais Leghari wrote to all chief ministers, requesting an end to ED collection. His reason? Simple: Bills are too complicated. Consumers don’t know what they’re paying for.

His plan aims to:

• Cut out non-electricity charges from bills.
• Reflect true power costs, not hidden taxes.
• Offer clarity and control to the consumer.

This move shows the government heard the public outcry, with the economy under pressure and inflation rising. “We want consumers to understand and manage their bills,” Leghari said. And removing the ED is step one.

The End of the PTV License Fee—More Relief

Before this, Prime Minister Shehbaz Sharif removed the Pakistan Television (PTV) license fee of Rs. 35 from power bills. That decision, too, came after heavy criticism.

So, these changes might save Rs. 410 annually per household, based on average consumption. It’s not massive. But for struggling families, every rupee counts. And symbolically, it’s a shift. Finally, the government no longer uses electricity bills as a tax dump.

Simplifying a Confusing Billing System

Let’s be honest—most electricity bills are hard to read. You see strange abbreviations. Multiple taxes. Service fees. Tariff adjustments. Then duties. For many, what’s being paid is a mystery, and to whom.

By removing ED, the federal government plans to:

• Cut down layers of taxes.
• Focus on actual energy charges.
• Improve transparency in billing.

“We want bills to show the cost of electricity, not serve as a collection system for other taxes,” said Leghari.

This helps especially those in rural or low-literacy areas. When you can understand your bill, you can plan your expenses better.

Solar Power and Structural Reform

The government isn’t just slashing charges—it’s also changing the power game. As part of its reform drive, it’s encouraging solar adoption and reducing dependence on thermal power.

Key steps include:

• Supporting the solarization of homes and small businesses.
• Renegotiating contracts with Independent Power Producers (IPPs).
• Lowering Return on Equity (ROE) for government-owned power plants.

Moreover, these moves have already saved Rs. 4.5 per unit, plus Rs. 7.5 more from lower global oil prices. That’s nearly Rs. 12 per unit in savings. This, combined with duty removal, brings bills closer to what people use, not what governments want to collect.

Provincial Governments Must Now Find Alternatives

Here’s the catch: ED was a provincial tax. Provinces used that revenue for local needs. With its removal, they now need new ways to collect funds.

Leghari urged chief ministers to:

• Stop relying on electricity bills for tax collection.
• Find fairer, clearer alternatives for provincial revenue.
• Work with the federal Power Division to design transparent systems.

The challenge? Some provinces may resist. They also relied on the ED. Losing it creates a gap they must fill. Will that gap return in other ways? That’s the concern.

Tax Impacts on Different Types of Users

Let’s break it down by user type:

So, who gains the most? Domestic and commercial users see the biggest short-term benefit.

Filing Status Still Matters for Bigger Savings

Even with duty gone, tax filing status still affects bills. Here’s how:

• Active Taxpayers (Filers): Exempt from advance tax.
• Non-Filers: Pay 7.5% withholding tax on bills over Rs. 25,000.
• Commercial/Industrial Users: Face Extra Tax (up to 5%) and Further Tax (up to 4%) if not registered.

Tip: Ensure your tax and meter info match if you’re a business. That can also help you avoid thousands in extra charges.

What Consumers Should Expect Going Forward

This isn’t just a one-time change. It’s part of a larger reform wave in Pakistan’s power sector. Expect:

• More pressure on provinces to rethink taxation.
• A push to register more users with FBR.
• Continued focus on solar and digital billing tools.

But also, stay alert. So, provinces may introduce new indirect taxes elsewhere. That’s why transparency must remain a key focus.

“We want electricity bills to stop being a burden, not shift the burden to another pocket,” one analyst said.

A Small Step, But a Needed One

In a country where power costs bite hard and people with low incomes carry the heaviest load, even a 1.5% cut matters. It sends a message: You matter. Yes, the path ahead is steep. Fixing Pakistan’s energy mess won’t happen overnight. But with every tax removed, every fee questioned, and every bill simplified, we inch closer to fairness.

Finally, electricity is a basic need, not a luxury. Making it affordable and understandable isn’t just policy. It’s dignity.