Govt likely to allocate Rs1.079 trillion subsidy for power sector in FY 2025-26 budget

The federal government is preparing to allocate Rs 1.079 trillion for the power sector subsidy in the fiscal year 2025-26, a reduction from the Rs 1.190 trillion earmarked for FY 2024-25, Business Recorder reported, citing sources within the Finance Division. 

These figures were finalised following meetings between the government’s economic team and the International Monetary Fund (IMF) mission. However, the finalisation of subsidy allocations for the power sector will depend on the available fiscal space, as confirmed by the Finance Ministry. 

This decision aligns with ongoing efforts to reduce the fiscal deficit and ensure the effective allocation of resources across all sectors.

The revised provisional Indicative Budget Ceilings (IDCs) for the power sector subsidy have also been set at Rs 636.136 billion for recurrent expenditures in FY 2025-26, up from the previous allocation of Rs 400 billion. 

The Finance Division is also requesting an additional Rs 50 billion for the Power Division to address extra subsidy requirements, particularly for circular debt management.

Details on whether the entire subsidy amount for FY 2024-25 has been fully utilised remain unclear, as the Finance Division has not disclosed whether any deviations occurred. 

The Finance Ministry has instructed the Power Division to ensure strict compliance with guidelines when preparing budget estimates, with particular focus on performance-based budgeting and expenditures.

The Finance Ministry has declined the Power Division’s proposal to release an advance subsidy of Rs 224 billion to address liquidity issues, citing the sufficiency of funds already allocated.