Government Plans to Phase Out Electricity Subsidies, Shift to Direct Cash Transfers

The government is planning to eliminate the protected electricity consumer category, a senior official told legislators on Tuesday. This initiative aims to replace subsidised electricity rates with direct financial aid for low-income families, starting in 2027.

During a briefing to the Public Accounts Committee (PAC), Power Division Secretary Dr. Muhammad Fakhr Alam Irfan stated that currently, 58% of Pakistani electricity consumers use 200 units or less each month and receive subsidies of up to 60% on their bills.

He noted that the number of consumers in this protected category has increased by 5 million in recent years.

Eligibility for future subsidies will be determined using the Benazir Income Support Programme (BISP) database, indicating a move towards more targeted assistance for vulnerable populations, he added.

The secretary also presented two proposals to the International Monetary Fund (IMF) aimed at enabling additional electricity supply at reduced costs.

  • The first proposal suggests allowing existing industries to purchase electricity at international rates for second-shift operations.
  • The second proposal involves offering discounted tariffs for new industries, cryptocurrency ventures, and data mining activities.

Discussions with the IMF are ongoing, and a formal response is still pending. If the IMF approves, these proposals will be submitted to the federal cabinet for approval.

During the session, PTI leader Umar Ayub Khan mentioned that the previous administration had already implemented a similar facility during the COVID-19 pandemic. He encouraged the current government to make independent decisions instead of solely relying on IMF directives.

PPP MNA Shazia Marri questioned the ongoing load-shedding despite surplus electricity production, pointing out that Sanghar experiences power outages lasting up to 14 hours. She also claimed that vested interests had delayed power generation from Thar coal for many years and acknowledged that opposition to the Sahiwal coal project was now seen as misguided.

Irfan responded that electricity is currently being generated from Thar coal and efforts are underway to expand its use. Plans include constructing a railway line to transport Thar coal to other power plants, and the Jamshoro power station will also be converted to use Thar coal.

He further clarified that there will be no establishment of new power plants reliant on imported fuel in the next decade. The government’s energy strategy will prioritise investments in hydropower, domestic coal-based power generation, and the expansion of renewable energy resources.

The power secretary added that steps are being implemented to alleviate the burden of cross-subsidies on industrial and commercial users, with the goal of establishing a more balanced and fair electricity tariff system.