ISLAMABAD – In a significant fiscal move, the federal government has reduced subsidies for the power sector by 13 percent in the upcoming financial year. According to budget documents for FY 2025-26, the subsidy has been cut down to Rs 1.036 trillion from the previous Rs 1.190 trillion allocated in FY 2024-25.
Overall, total subsidies have been slashed by 14 percent, going from revised estimates of Rs 1.378 trillion to Rs 1.186 trillion for the next fiscal year.
Among the major cuts:
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Inter-Disco Tariff Differential: Reduced to Rs 249.136 billion from Rs 276 billion, a 9.8% drop.
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Balochistan Agricultural Tubewells: Subsidy dropped from Rs 9.5 billion to Rs 4 billion.
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Merged Districts of KP (Erstwhile FATA): Allocation decreased sharply by 38.5% to Rs 40 billion from Rs 65 billion.
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AJK (Azad Jammu and Kashmir): Subsidy allocation reduced by 31.5% to Rs 74 billion.
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K-Electric: Receives Rs 125 billion, a drop of 28% from Rs 174 billion.
The Pakistan Energy Resolving Fund (PERA) maintains its previous allocation of Rs 48 billion, earmarked for monthly payments to Chinese IPPs under the China-Pakistan Economic Corridor (CPEC).
Subsidy to Independent Power Producers (IPPs) has also been reduced from Rs 115 billion to Rs 95 billion, while a lump-sum subsidy provision for power has been allocated at Rs 400 billion, down from an actual Rs 509 billion in FY 2023-24.
Notably, the petroleum subsidy has been slashed drastically to just Rs 1.2 billion for FY 2025-26 from Rs 18.4 billion in 2023-24. No allocations have been made to cover the shortfall for Asia Petroleum or domestic RLNG consumers via SNGPL, which previously stood at Rs 16 billion.
In other sectors:
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PASSCO: Rs 20 billion allocated for wheat reserves (Rs 14 billion for stock, Rs 6 billion for price differential).
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Industries & Production: Cut from Rs 68 billion to Rs 24 billion, including Rs 9 billion for EV scheme and Rs 15 billion for USC sugar arrears. No allocation was made for PM’s USC or Ramzan packages.
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Other subsidies: Increased to Rs 104.7 billion from Rs 75 billion, covering programs like wheat for GB, urea imports, SME support, low-cost housing, and Metro Bus operations.
This budget realignment appears to follow an understanding with the IMF, aimed at reducing the fiscal deficit and introducing power tariff reforms.
