Pakistan is preparing to overhaul its gas and electricity subsidy system, with the government planning to move away from the existing slab-based and cross-subsidy arrangements towards targeted relief for low-income households.
According to media reports, the proposed reforms are linked to commitments made under Pakistan’s International Monetary Fund (IMF) programme. The objective is to reduce the financial burden on the energy sector by directing subsidies towards eligible consumers rather than providing relief through the existing tariff structure.
The changes could affect how households qualify for subsidised gas and electricity, although the final impact on individual bills will depend on the approved tariff rates and eligibility criteria.
Pakistan plans to replace existing subsidy system
The government is working to replace the existing tariff differential subsidy and cross-subsidy system with a targeted subsidy framework for low-income consumers.
Under the current arrangement, different consumer categories pay different rates for gas and electricity. Cross-subsidies also allow some categories of consumers to receive financial support through charges borne by other categories.
The proposed reform aims to identify eligible households through a national socioeconomic registry and provide subsidies based on their financial circumstances.
The government has undertaken to accelerate preparations for the transition as part of its efforts to address financial pressures in the energy sector.
New registry to identify eligible consumers
The Power Division, with assistance from the World Bank, has started work on a socioeconomic registry of electricity consumers.
The government has set a target of completing the technical integration and validation of consumer data by the end of November 2026. The verified information is expected to be linked with the Benazir Income Support Programme (BISP) database to help determine which households qualify for assistance.
The registry is intended to improve the identification of low-income consumers and make subsidy payments more targeted.
However, the final eligibility criteria and the amount of relief available to individual households will depend on the government’s approved policy.
Electricity bills may change under new tariff arrangements
Electricity distribution companies have submitted requests for base tariff adjustments as preparations continue for the proposed changes.
The government plans to move towards a system in which electricity subsidies are directed towards eligible low-income consumers through a targeted, budgeted framework.
Under the proposed arrangement, consumers who qualify for assistance could continue to receive relief, while other consumers may face different effective bills depending on the revised tariffs and the withdrawal of existing cross-subsidies.
The precise impact cannot yet be determined because the final tariff structure and eligibility rules have not been confirmed.
The government has also informed the IMF about preparations for reforms in electricity distribution companies, including planned privatisation and other restructuring measures.
Gas consumers may also face changes
The proposed reforms extend to the gas sector, where the government aims to replace the existing cross-subsidy arrangements with targeted assistance for eligible households.
According to the reports, the government intends to link gas consumers with the national socioeconomic registry from July 1, 2027. Eligibility for subsidised gas would then be assessed using the new system.
The changes are intended to help contain the gas sector’s circular debt, which has been estimated at around Rs3.6 trillion, including outstanding principal and accumulated interest and late-payment surcharges.
Existing protected consumer categories have contributed to differences between the tariffs charged to households and the cost of supplying gas, according to the reports.
The proposed transition would seek to direct relief towards households identified as eligible rather than relying primarily on the existing consumer categories.
What is the deadline for the proposed changes?
The government has committed to advancing the subsidy reforms according to the following timeline:
-
By the end of November 2026: Complete technical linking and validation of electricity consumer data with the national socioeconomic registry.
-
By January 2027: Replace the existing budgeted tariff differential subsidy and cross-subsidy arrangements for electricity with a targeted subsidy framework for eligible low-income consumers.
-
From July 1, 2027: Begin linking gas consumers to the socioeconomic registry to determine eligibility for targeted assistance.
These are reported policy milestones, not confirmation that every proposed change has already been implemented.
Will gas and electricity bills increase?
Not necessarily for every consumer. The impact will depend on the final tariff rates, the consumer’s category and whether the household qualifies for targeted assistance.
Low-income households that meet the approved eligibility criteria may continue to receive subsidies under the new framework. Other consumers could see changes in their bills if existing cross-subsidies are withdrawn or tariffs are revised.
Consumers should therefore avoid assuming that their bills will automatically increase or decrease by a specific amount before the government announces the final rates and eligibility rules.
The bottom line: Pakistan is preparing to change how gas and electricity subsidies are allocated, with greater emphasis on identifying eligible households through a national socioeconomic registry. The proposed reforms could alter the effective bills paid by different consumer groups, but the actual impact will depend on the final government decisions.
