Pakistan has assured the International Monetary Fund (International Monetary Fund) that it will phase out the existing Rs. 140 billion gas subsidy currently provided to protected and some non-protected consumers, replacing it with a targeted assistance system linked to household income through the Benazir Income Support Programme (Benazir Income Support Programme).
According to reports, the transition to the new tariff framework is required to be completed by January 2027 under a structural benchmark agreed with the IMF as part of Pakistan’s ongoing economic reform commitments.
Under the proposed system, protected and certain non-protected domestic consumers will no longer receive subsidized gas through lower consumption slabs. Instead, all consumers will be charged the full average gas tariff, while low-income households deemed eligible will receive direct financial support through BISP based on income criteria rather than gas usage levels.
Officials said the move is aimed at reforming the energy sector and addressing distortions in the current gas pricing structure.
At present, the subsidy burden of around Rs. 140 billion is being financed through cross-subsidies imposed on sectors including captive power plants operated by export industries, commercial consumers, CNG stations, cement manufacturers, industrial users, and high-end domestic consumers.
The average gas tariff currently stands at approximately Rs. 1,750 per MMBtu.
Authorities clarified that the federal government does not directly finance these subsidies through the national budget. Instead, lower-end consumers currently receive relief through higher tariffs charged to industrial and commercial sectors.
Once the revised mechanism is implemented, all consumer categories are expected to pay the uniform average gas tariff of Rs. 1,750 per MMBtu, effectively ending the existing cross-subsidy model.
