Pakistan plans new electricity, gas subsidy system from 2027

Pakistan has fast-tracked changes in the energy sector to meet the International Monetary Fund (IMF) conditions and directions, and the government has been working on revamping the present electricity and gas slab and cross-subsidy systems.

Sources said the planned approach intends to confine electricity and gas subsidies to the deserving and low income clients.

The plan provides for the enactment of a new mechanism of electricity subsidies in January 2027, while the new system for gas consumers is expected to be implemented on July 1, 2027.

In a bid to enhance transparency and efficiency, the Power Division has started work on a specialized socioeconomic registry of qualified users with support from the World Bank.

The government expects to finish the registration of eligible consumers by November this year, sources added.

The data collected will be verified and then compared to the main Benazir Income Support Program (BISP) database. This will allow officials to determine who actually qualifies for financial help and subsidies.

The objective is to scrap the existing system of tariff differential subsidy and cross subsidy for electricity by January 2027 and to take gas consumers on board with the same database by July 1, 2027.

The reformed subsidy structure is aimed at relieving the long-standing pressure of the circular debt on the energy sector.

The sources claimed electricity distribution companies (DISCOs) also filed formal applications for revision of the benchmark electricity rate.

Meanwhile, the government has briefed the IMF about preparations for privatization of electricity distribution businesses and administrative reforms. The initiatives are intended to help achieve the objectives of permanently reducing circular debt and enhancing the energy industry.