Power sector subsidy cut 19% to Rs 830 billion in FY27 budget

The federal government has reduced the power sector subsidy by around 19% to Rs830 billion for fiscal year 2026-27, compared with the Rs1.036 trillion originally allocated for the outgoing year, according to budget documents.

The FY26 power subsidy was later revised down to Rs893.136 billion.

Overall subsidies have been reduced by 8% to Rs1.091 trillion for FY27 from the Rs1.186 trillion budgeted for the current fiscal year.

The allocation for the inter-distribution company tariff differential subsidy has been marginally lowered to Rs248 billion from Rs249.135 billion.

The tariff differential subsidy for agricultural tube wells in Balochistan has been reduced to Rs3 billion from Rs4 billion.

A separate Rs1 billion allocation for agricultural tube wells in Balochistan has been maintained at the FY26 level.

Subsidies for the merged districts of Khyber Pakhtunkhwa have been cut by 15% to Rs34 billion from Rs40 billion.

By contrast, the subsidy for Azad Jammu and Kashmir has been increased by 9.5% to Rs81 billion from Rs74 billion.

The allocation under the Pakistan Energy Revolving Fund remains unchanged at Rs48 billion. The fund is intended to support monthly payments of Rs5 billion to Chinese independent power producers established under the China-Pakistan Economic Corridor.

K-Electric subsidy rises

The subsidy for K-Electric has been increased by around 30% to Rs163 billion for FY27 from Rs125 billion in the outgoing fiscal year.

No allocation has been made for payments to independent power producers next year. The government had initially earmarked Rs95 billion for this purpose in FY26 before revising the amount to Rs200 billion.

The budget includes a new Rs252 billion provision for containing circular debt in the power sector. No separate allocation was made under this head in FY26.

The government has also discontinued lump-sum subsidy allocations. It had initially budgeted Rs400 billion under this category for FY26 before revising the amount to Rs152 billion.

No funds have been allocated for petroleum products against the shortfall in guaranteed throughput of PEPCO. The outgoing year’s allocation of Rs 1.2 trillion under this head was later revised to Rs 1.183 trillion.

The government has also made no provision for subsidising regasified liquefied natural gas supplies to industry, compared with Rs17 billion allocated in FY26.