ISLAMABAD: In a bid to contain fiscal pressures, the federal government has trimmed the total subsidy allocation to Rs1.186 trillion for the fiscal year 2025-26—down by Rs180 billion from the revised estimate of Rs1.378 trillion in the current year.
Of the total, Rs1.036 trillion—nearly 87%—is earmarked for the power sector, reflecting continued support to electricity consumers despite fiscal tightening. This includes Rs249 billion for Inter-Disco tariff differential, Rs125 billion for K-Electric’s tariff support, and Rs95 billion for payments to Independent Power Producers (IPPs). Notably, Rs40 billion has been allocated for the merged districts of Khyber Pakhtunkhwa, down from Rs65 billion.
Allocations for other critical areas have also been adjusted. The tariff differential subsidy for Azad Jammu and Kashmir has been reduced to Rs74 billion, while the Pakistan Energy Revolving Fund (PERA) maintains its previous year’s allocation at Rs48 billion. Petroleum subsidies have been cut drastically to just Rs1.2 billion from Rs18.4 billion.
In the agriculture and food sectors, Rs20 billion has been set aside for PASSCO, with Rs14 billion for wheat reserves. The government also earmarked Rs15 billion to clear Utility Stores Corporation sugar subsidy arrears and Rs9 billion in incentives for electric vehicles (EVs), though no funds are allocated for the Ramazan Package or the USCP PM Package.
The ‘other subsidies’ category has been raised to Rs104 billion, covering wheat support in Gilgit-Baltistan (Rs20bn), imported urea (Rs15bn), and various housing and SME support schemes.
This substantial reduction underscores the government’s attempt to rationalize spending while balancing relief for essential sectors under tight fiscal constraints.
Story by Zafar Bhutta
