Revisions Expected in Basic Electricity Tariff by January 2027, Subsidy Redirection Via Income Support Program Proposed Ahead of IMF Talks
ISLAMABAD: Important policy adjustments in Pakistan’s energy sector are on the horizon, as crucial economic talks between the federal government’s economic team and the International Monetary Fund (IMF) are scheduled to take place next week.
According to official sources, upcoming negotiations will feature comprehensive briefings to the IMF delegation regarding structural energy reforms, the privatization roadmap of power entities, and the comprehensive circular debt settlement framework.
Proposed Tariff Adjustments and Subsidy Redirection
Reports indicate that a downward or structural revision in the basic electricity tariff is anticipated in January 2027. Under proposed fiscal adjustments, future electricity subsidies are planned to be channeled directly to deserving consumers through income support programs. However, experts warn that full cost-recovery mechanisms and the gradual phasing out of cross-subsidies could exert upward pressure on consumer tariffs.
Sources further revealed that while the government has successfully finalized the regulatory framework for a competitive power market, the formal auction process has yet to commence.
Privatization of DISCOs and Circular Debt Challenges
Progress on the privatization of major distribution companies—specifically the Islamabad, Faisalabad, and Multan Electric Supply Companies—is moving forward, with Expressions of Interest (EOIs) already issued. Both domestic and international foreign investors have reportedly expressed interest in acquiring the DISCOs.
Meanwhile, maintaining the power sector’s circular debt at a capped target of Rs1,614 billion remains a key objective, whereas settling the gas sector’s massive circular debt standing at approximately Rs3,600 billion has been termed a major structural challenge. Full cost recovery for liquefied natural gas (LNG) and planned revisions to the gas slab billing system could also lead to price adjustments.
Additionally, issuing biannual notifications for gas price revisions remains a core structural condition under the IMF program. During the upcoming review sessions, the government will brief the IMF on transmission network overhauls in both the power and gas sectors, alongside expanded private-sector participation.