The Ministry of Finance has informed the Power Division that the allocation of power sector subsidies for the fiscal year 2025-26 will depend on available fiscal space, as Pakistan grapples with an ongoing challenge of bridging the circular debt gap, according to a news report.
The Finance Ministry clarified that while the allocation process for the power sector will continue through the standard budgetary procedure, there will be no new taxes or levies to address the Rs1.56 trillion shortfall.
In a letter to the Power Division, the Finance Ministry responded to the request for an advance subsidy of Rs224 billion, stating that sufficient funds had already been allocated in previous years. A total of Rs633 billion has been earmarked to meet the power sector’s needs, with Rs509 billion provided under the Finance Division’s Demand No. 45 in the current fiscal year, covering arrears and additional subsidies for various power companies.
According to the news report, the Finance Ministry argued that although the power sector continues to face liquidity issues, ample funds are available to cover these requirements, and the funds should be utilised in accordance with the budget allocations.
The Finance Ministry recommended that Rs174 billion could be released, addressing verified subsidy claims related to TDS-KE and Fata. However, the request for additional funds beyond the allocated budget was not supported.
Additionally, the Finance Ministry noted that the relief extended to protected consumer categories during the first three months of FY 2024-25 should have been funded from the Public Sector Development Programme (PSDP) savings.
The ministry also emphasized that subsidies for Discos and K-Electric should only be provided against verified claims after completing all necessary formalities.
