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

Prime Minister Shehbaz Sharif has established a ministerial committee, led by Planning, Development and Special Initiatives Minister Ahsan Iqbal, to develop a strategy for rationalizing power subsidies and transitioning to targeted support. The committee comprises 13 members, including senior government officials, a retired general, and a representative from the Government Relations Unit at the Prime Minister's Office.

The committee's goal is to submit recommendations within two months, with the reforms taking effect from January 1, 2027.

The proposed reforms aim to shift from broad-based electricity subsidies to a targeted mechanism that provides financial assistance to low-income households through a beneficiary identification and verification system. The initiative aligns with the government's efforts to rationalize public expenditure, enhance fiscal discipline, and ensure subsidies reach the intended beneficiaries.

The committee will review the existing subsidy framework, pinpoint shortcomings, and propose a mechanism for gradually withdrawing or restructuring untargeted subsidies.

The committee will also consider linking electricity subsidy payments with the Benazir Income Support Programme (BISP) and the necessary institutional arrangements. This may involve developing a reliable beneficiary registry, verification mechanisms, and coordination between the Power Division, Finance Division, and BISP. The committee will examine the fiscal implications of the current subsidy structure and propose measures to contain the government's financial burden while protecting vulnerable consumers.

The total subsidy bill for Pakistan is estimated at Rs1.091 trillion, with the power-sector subsidy allocation for the fiscal year 2026-27 at Rs830 billion. The government aims to improve the efficiency of subsidy spending and align the mechanism with its broader fiscal consolidation commitments. The reforms are also in line with Pakistan's commitments under its programs with international financial institutions, such as the International Monetary Fund (IMF) and the World Bank.