Pakistan to end untargeted power subsidies

Pakistan’s decision to phase out untargeted residential electricity subsidies from next year marks a major shift in the country’s economic and energy policy. Under an agreement with the International Monetary Fund (IMF), the government plans to replace the existing subsidy system with targeted financial assistance through the Benazir Income Support Programme (BISP).

The current subsidy structure allows households using up to 200 electricity units per month to receive reduced rates. However, authorities say the system has increasingly been abused by consumers who install multiple electricity meters to remain within the subsidised limit. Officials believe this practice has contributed to financial losses and distorted the pricing structure of the power sector.

Economic experts argue that Pakistan can no longer afford broad-based subsidies while facing mounting circular debt, energy inefficiencies and weak revenue recovery. They say the move toward income-based support is intended to ensure that only genuinely deserving households receive financial assistance.

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The government also believes that removing untargeted subsidies could ease pressure on industrial electricity tariffs. Industries have long complained that higher commercial power rates, introduced to offset residential subsidies, have damaged competitiveness, exports and employment opportunities.

Despite the economic rationale, the decision is expected to face public criticism. Many lower-middle-income families who do not qualify for BISP assistance are already struggling with inflation, stagnant incomes and rising utility costs. Analysts warn that higher electricity bills could further reduce household purchasing power and force families to cut spending on essential needs.

Public concern has also grown over perceptions of inequality, as influential sectors and some public institutions continue to benefit from subsidised or free electricity. Critics argue that reforms may be difficult to justify unless the government also addresses these longstanding privileges alongside broader energy sector restructuring efforts.