Existing subsidy system soon to be replaced

Targeted electricity and gas subsidies to begin in 2027

ISLAMABAD:

The federal government has accelerated energy-sector reforms to meet the International Monetary Fund's (IMF) conditions, preparing to phase out the existing electricity and gas slab and cross-subsidy systems and restrict financial assistance to deserving and low-income consumers.

Under the proposed plan, a new electricity subsidy mechanism is scheduled to take effect in January 2027, while the revised system for gas consumers is expected to be introduced on July 1, 2027, according to official sources.

The Power Division has begun work, with the support of the World Bank, on a socioeconomic registry to identify consumers eligible for subsidies.

The registration process is targeted for completion by November, after which the verified data will be linked with the Benazir Income Support Programme (BISP) records.

The proposed registry will be used to identify eligible households and determine which consumers qualify for electricity and gas subsidies under the new mechanism.

The changes are intended to direct subsidies towards low-income households instead of continuing the existing arrangements, under which tariff structures and cross-subsidies provide financial relief to different categories of consumers.

Sources said the government had planned the changes partly to ease mounting pressure from circular debt in the energy sector. Reforms are also being pursued alongside preparations for the privatisation of power distribution companies.

The distribution companies have filed applications seeking base tariff adjustments, while the government has briefed the IMF on preparations related to their privatisation and broader energy-sector reforms, the sources added.

The proposed shift towards targeted subsidies would make the socioeconomic registry a central tool for determining eligibility for government assistance in electricity and gas bills.