ISLAMABAD: The federal government has reduced the power sector subsidy by around 19 percent to Rs 830 billion for FY2026-27, down from Rs 1.036 trillion for FY2025-26, which was later revised to Rs 893.136 billion, according to budget documents.
Overall, total subsidies have declined by 8 per cent to Rs 1.091 trillion for FY2026-27, compared to Rs 1.186 trillion in the ongoing fiscal year.
The allocation for Inter-Disco tariff differential subsidy has been marginally reduced to Rs 248 billion for FY2026-27 from Rs 249.135 billion in FY2025-26. Similarly, subsidy for tariff differential for agricultural tubewells in Balochistan has been cut to Rs 3 billion from Rs 4 billion.
Subsidies for the merged districts of Khyber Pakhtunkhwa (erstwhile FATA) have been reduced by 15 per cent to Rs 34 billion, compared to Rs 40 billion for 2025-26.
In contrast, the government has increased the subsidy for Azad Jammu and Kashmir (AJK) by 9.5 per cent to Rs 81 billion for FY2026-27, up from Rs 74 billion. The allocation under the Pakistan Energy Resolving Fund (PERA) remains unchanged at Rs 48 billion, aimed at making monthly payments of Rs 5 billion to Chinese Independent Power Producers (IPPs) established under the China-Pakistan Economic Corridor (CPEC).
The subsidy for K-Electric has been increased by over 30 per cent to Rs 163 billion for FY2026-27, compared to Rs 125 billion in FY2025-26.
Meanwhile, Rs 1 billion has been allocated for agricultural tubewells in Balochistan, unchanged from FY 2025-26.
Notably, the government has made no allocation for payments to IPPs in FY2026-27, despite earmarking Rs 95 billion in FY2025-26, which was later revised upward to Rs 200 billion.
A new allocation of Rs 252 billion has been made for FY 2026-27 for the containment of circular debt (CD) in the power sector, whereas no such provision existed in FY 2025-26.
The government has also discontinued lump-sum subsidy allocations. Initially, Rs 400 billion had been earmarked under this head for FY2025-26, which was later revised to Rs 152 billion.
No subsidy has been allocated for petroleum products on account of shortfall in guaranteed throughput of PEPCO, against Rs 1.2 trillion allocated in FY2025-26 (later revised to Rs 1.183 trillion). Likewise, no allocation has been made for RLNG supply to industry, compared to Rs 17 billion for FY 2025-26.
For the Pakistan Agricultural Storage and Services Corporation (PASSCO), Rs 19 billion has been allocated for wheat reserve stock in FY2026-27, split equally between stock maintenance and cost differential for wheat sales.
Subsidies under the Industries and Production Division have increased to Rs 37 billion from Rs 24 billion, including Rs 8 billion for electric vehicle incentives and Rs 5.8 billion for urea fertilizer production and supply.
An allocation of Rs 23 billion has been made for the Utility Stores Corporation (USC), although no funds have been earmarked for sugar subsidy arrears.
Under the head of “other subsidies,” the allocation stands at Rs 205 billion, reflecting a complex shift compared to the previous year’s revised figure of Rs 230.478 billion.
Key components include: Rs 15 billion for wheat subsidy to Gilgit-Baltistan (down from Rs 20 billion), Rs 10 billion for urea imports (down from Rs 15 billion), Rs 5 billion for the Mera Pakistan Mera Ghar scheme, Rs 5 billion each for farm mechanization and Kissan package initiatives, and Rs 1 billion for SME Asaan Finance.
A significant increase has been observed in markup subsidy to phase out SBP refinancing schemes, rising to Rs 88 billion from Rs 30 billion — a jump of 195 per cent. Other allocations include Rs 2 billion for SME financing, Rs 1 billion for gas supply schemes within a 5-kilometre radius, and Rs 5 billion for Metro Bus subsidy (down from Rs 7.3 billion).
Additionally, Rs 71 billion has been allocated for the Prime Minister’s Apna Ghar Programme, while Rs 1 billion has been earmarked under miscellaneous subsidies.
Copyright Business Recorder, 2026