ISLAMABAD: The government has reportedly assured the International Monetary Fund (IMF) that subsidy on electricity and gas will be harmonized with Benazir Income Support Fund (BISP) so that the facility is extended only to the deserving consumers, well informed sources in Finance Ministry told Business Recorder.
The Finance Ministry further said that reform is meant to align energy sector reforms with national climate mitigation commitments.
According to Finance Ministry by end January 2027, the government will reform energy subsidy system to reduce incentives for overconsumption, wasted energy, and incentives for theft and losses.
Energy sector reforms: Govt makes new commitments to IMF
“Our electricity subsidies are large, distortive, and broadly targeted with subsidies sometimes accruing to higher-income households, leading to overconsumption and energy wastage, distortions across the tariff structure and risks to cost recovery and power sector viability.
“With this in mind, we will implement an electricity subsidy reform that replaces the existing budgeted tariff differential subsidy and cross-subsidy system with consumers, to be facilitated via BISP, and a simplified tariff structure, in the context of the FY27 budget and 2026-27 with initial rebates to begin by end-January 2027.
Ahead of this implementation, the government will closely work with the IMF and World Bank to identify and verify consumers to be targeted under the new subsidy framework by end-January 2026; define eligibility criteria by end-July 2026; have a rebate mechanism in place with financial institutions by end-July 2026; and begin to roll out communications campaign around this by end-June 2025, the sources continued.
“We will also seek to reform our gas subsidy system, which also entails a distortive and broadly-targeted cross-subsidy system that spur overconsumption and wastage, to target low income consumers. We will undertake analysis to better assess the viability of a scheme similar to that to be implemented in the power sector, and will decide on a path forward by end-June 2026,” the sources maintained.
According to Finance Ministry, efforts to boost energy efficiency will help to meet national mitigation commitments.
The government will improve energy efficiency in Pakistan by implementing recently-adopted regulations on Minimum Energy Performance Standards (MEPS) for consumer appliances by achieving MEPS compliance for all new fans (40 percent), LEDs (30 percent), refrigerators (35 percent), air conditioners (30 percent), and motors (25 percent) by end-June 2027; and via Public Procurement Regulatory Authority (PPRA) adoption of new regulations, by end-December 2025, mandating that procurement of the same five appliances, at the federal and provincial levels, are MEPS compliant.
“To support tracking and implementation of this objective, the National Energy Efficiency and Conservation Authority will provide tracking data on progress toward consumer appliance adoption on a quarterly basis, beginning in December 2025,” Finance Ministry said requesting the concerned Ministries to ensure timely implementation of the agreed Reform Measures under the Resilience and Sustainability Financing (RSF).
Copyright Business Recorder, 2025
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