The federal government has proposed major changes in subsidy allocations for various sectors in Budget 2026-27, reducing the power sector subsidy to Rs830 billion and proposing an end to subsidies for the petroleum sector in the next fiscal year.
According to budget documents, the subsidy for the power sector has been fixed at Rs830 billion for the next fiscal year. This is lower than the Rs893 billion allocated during the current fiscal year, showing a reduction in the overall power sector subsidy.
The budget document also proposes Rs252 billion to control circular debt in the energy sector.
The government has allocated Rs248 billion for inter-DISCO tariff differential subsidy. For K-Electric, the budget proposes increasing the tariff differential subsidy to Rs163 billion.
The tariff differential subsidy for Azad Kashmir has been fixed at Rs81 billion.
Funds for merged districts, Balochistan tube wells
The budget proposes Rs34 billion for the merged districts of Khyber Pakhtunkhwa. A subsidy of Rs3 billion has also been allocated for agricultural tube wells in Balochistan.
According to the budget document, Rs48 billion has been allocated for the Pakistan Energy Revolving Fund. The government has also allocated Rs19 billion to PASSCO for wheat reserves and price differential support.
Urea, electric vehicles, USC arrears
A subsidy of Rs5.8 billion has been allocated for the production and supply of urea fertilizer. The budget proposes maintaining an Rs8 billion subsidy for the electric vehicle scheme.
In addition, Rs23.2 billion has been allocated for payment of arrears of the Utility Stores Corporation.
Petroleum subsidy, IPP payments
The budget documents include a proposal to abolish subsidies for the petroleum sector in the next financial year. The government has also proposed ending the system of direct payments to Independent Power Producers in the next budget.
