ISLAMABAD: The federal government has announced a reduction in subsidies for the power sector and several other areas in the Budget 2026-27, according to official documents.
The subsidy for the power sector has been cut by around 19 percent to Rs 830 billion, down from Rs 1.036 trillion in the previous year. Overall, total subsidies have also fallen by 8 percent to Rs 1.091 trillion for the upcoming fiscal year.
Some subsidy areas have seen small changes. The Inter-Disco tariff subsidy has slightly decreased, while support for agricultural tubewells in Balochistan has also been reduced. Subsidies for the merged districts of Khyber Pakhtunkhwa have dropped by 15 percent.
However, not all sectors faced cuts. The subsidy for Azad Jammu and Kashmir has increased, and support for K-Electric has also gone up by more than 30 percent. The government has also kept funding unchanged for some energy-related programs.
A major change in the budget is the allocation of Rs 252 billion to control circular debt in the power sector. At the same time, no new allocation has been made for payments to independent power producers (IPPs), which received funding in the previous year.
Subsidies for petroleum products and RLNG supply to industries have been removed this year, while new support has been added for agriculture, industry, and social programs. These include funding for wheat reserves, fertilizer production, electric vehicle incentives, and housing schemes.
The government has also increased support for markup subsidies and SME financing, while reducing some transport and food-related subsidies.
Officials say these changes reflect a shift in subsidy policy aimed at better financial management and targeted support for key sectors.
