Targeted power subsidies: PM sets up ministerial body to devise strategy

ISLAMABAD: Prime Minister Shehbaz Sharif has constituted a high-level ministerial committee, headed by Planning, Development and Special Initiatives Minister Ahsan Iqbal, to formulate a comprehensive strategy for rationalisation of power-sector subsidies and their gradual transition towards a targeted support mechanism, linked with the Benazir Income Support Programme (BISP).

The committee is headed by Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal and includes Rana Sanaullah Khan, Sardar Awais Ahmad Khan Leghari, Dr Musaddak Malik, Ahad Khan Cheema, Shaza Fatima Khawaja, Attaullah Tarar, Muhammad Ali, Bilal Azhar Kayani, Lt Gen Muhammad Zafar Iqbal (Retd) and Talha Barki as members. The committee also includes the Secretary Finance, Chairman NADRA, Secretary Power, Head of the Government Relations Unit (GRU) at the Prime Minister’s Office, a GRU-nominated energy expert and Dr Sohail Anwar Ch.

According to the decision, the committee has been tasked with submitting its recommendations within two months from October 18, 2026, with the proposed reforms envisaged to take effect from January 1, 2027.

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The proposed reforms are aimed at moving away from broad-based electricity subsidies towards a targeted mechanism under which financial assistance would be provided to deserving consumers, particularly low-income households, through an appropriately designed beneficiary identification and verification system.

The initiative is part of the government’s broader efforts to rationalise public expenditure, improve fiscal discipline and ensure that subsidies reach the intended beneficiaries rather than being extended indiscriminately across different consumer categories.

The committee will examine the existing subsidy framework, identify shortcomings in the present system and recommend a mechanism for the gradual withdrawal or restructuring of untargeted subsidies. It will also consider the institutional arrangements required to link electricity subsidy payments with BISP and the relevant beneficiary database.

The government is considering changes to the existing electricity subsidy regime, including relief available to consumers using up to 200 units per month.

Under the proposed approach, eligibility would increasingly be determined through a targeted assessment of household circumstances rather than electricity consumption alone.

However, the proposed transition will require the development of a reliable beneficiary registry, a mechanism for verification of eligible consumers and arrangements for coordination between the Power Division, Finance Division and BISP. The framework for identifying beneficiaries and implementing the proposed changes has yet to be finalised.

The committee is also expected to examine the fiscal implications of the existing subsidy structure and propose measures to contain the government’s financial burden while protecting vulnerable consumers from an abrupt increase in electricity bills.

Pakistan’s total subsidy bill is estimated at Rs1.091 trillion, reflecting the substantial pressure that subsidy commitments continue to place on the federal budget. The power-sector subsidy allocation for fiscal year 2026-27 stands at Rs830 billion.

The government is seeking to improve the efficiency of subsidy spending and align the mechanism with its broader fiscal consolidation commitments. The proposed reforms are also relevant to Pakistan’s commitments under its programmes with international financial institutions, including the International Monetary Fund (IMF) and the World Bank.

The committee will examine the existing arrangements, assess the impact of proposed changes on different consumer groups and recommend a phased implementation plan.

The objective is to ensure that any restructuring of subsidies is accompanied by adequate safeguards for low-income households.

The proposed rationalisation is expected to focus on better targeting of government assistance, improved transparency in beneficiary selection and stronger coordination among the departments responsible for subsidy administration.

The committee’s recommendations will determine the scope and pace of the transition, including the institutional and administrative arrangements required to implement the proposed mechanism from January 1, 2027.

The government aims to bring subsidy expenditure within a more sustainable fiscal framework while ensuring that assistance is directed towards households most in need of support.

Copyright Business Recorder, 2026