ISLAMABAD - The federal government has reduced the subsidies amount to Rs1.091 trillion for the next fiscal year 2026-27. This marks a 5.7 percent decrease from the revised Rs1.157 trillion allocated in the outgoing financial year. The reduction aligns with the International Monetary Fund (IMF)’s directives to curb fiscal spending.
Power Sector Subsidies
The major portion of subsidies will still go to the power sector, but overall allocations have been slashed. The government has allocated Rs830 billion to WAPDA/PEPCO for FY 2026-27, compared to Rs893 trillion in the previous year. Within the power sector, the breakdown includes:
- Rs248 billion for inter-DISCO differential
- Rs163 billion for K-electric power differential
- Rs252 billion for containment of commercial losses
- Rs48 billion for Pakistan Energy Revolving Fund (PERA)
- Rs81 billion for tariff differential for Azad Jammu and Kashmir
- Rs34 billion for merged districts of Khyber Pakhtunkhwa (erstwhile FATA)
- Rs3 billion for tariff differential for agriculture tube wells in Balochistan
Other Sector Allocations
Subsidies for Pakistan Agricultural Storage and Services Corporation (PASSCO) have been reduced by Rs1 billion to Rs19 billion. This includes Rs9.5 billion for wheat reserve stock and Rs9.5 billion for cost differential of wheat sale. The Ministry of Industries and Production received Rs37 billion, covering Rs5.8 billion for urea fertiliser production and supply, Rs8 billion for electric vehicle scheme incentives, and Rs23.2 billion for subsidy arrears.
The government allocated Rs205 billion for other sectors, including:
- Rs15 billion for wheat subsidy for Gilgit-Baltistan
- Rs10 billion for urea fertiliser imports
- Rs5 billion for Mera Pakistan Mera Ghar Scheme
- Rs5 billion for mark-up subsidy and risk sharing for farm mechanisation/Kissan package
- Rs1 billion for refinance and credit guarantee scheme (SME Asaan Finance)
- Rs2 billion for enhancing financing to SME sector
- Rs88 billion for phasing out SBP refinancing facilities
- Rs1 billion for 5KM radius gas scheme
- Rs1 billion for RSGT claims
- Rs5 billion for metro bus subsidy
- Rs71 billion for PM Apna Ghar Programme
- Rs1 billion for other subsidies
These measures reflect the government's efforts to comply with IMF conditions while attempting to manage fiscal constraints.
