Govt plans income-based electricity subsidies, 250-unit limit under review

October 28, 2026 (MLN): The power sector’s circular debt has declined to below Rs1.67 trillion from around Rs2.07tr, while annual government budget support for the Power Division is expected to fall to around Rs750bn this year, a minister told the Senate.

The Power Minister Awais Leghari said circular debt had declined over the past two and a half years, adding that the government had also reprofiled Rs1.2 trillion in circular debt financing under a scheme.

Under the revised financing arrangement, the Debt Servicing Surcharge (DSS) of Rs3.23 per unit, currently included in electricity bills, is expected to be eliminated over the next four years.

The remaining circular debt of around Rs1.67tr is also expected to be fully paid off within the same period, he said.

The Awais Leghari described these measures as major government reforms, emphasising that the reduction in circular debt had already taken place rather than being a future target.

DISCO losses decline to Rs325bn

Addressing concerns over the performance of power distribution companies (DISCOs), the Awais Leghari said their inefficiencies had not been completely eliminated but that financial losses had declined significantly over the past two to two and a half years.

He said annual DISCO losses, including those arising from electricity theft and failure to recover bills, stood at Rs591bn when the current government took office in 2024. These losses were expected to decline to Rs325bn in the current year, compared with Rs360bn last year.

According to the minister, the reduction in losses was unprecedented in Pakistan's history.

He clarified that these losses were not directly showed in electricity prices but were covered through government budget support provided by the Finance Ministry, using taxpayers' money.

The Awais Leghari said the reduction in losses had helped lower the government's financial burden by more than Rs200bn. However, consumers had not received a corresponding reduction in electricity prices, he added.

Power Division's budget support falls

The minister said the Power Division received Rs1.18tr annually in budget support from the Finance Ministry when the current government took office in 2024.

This amount is expected to decline to around Rs750bn in the current year, reflecting a reduction in the financial burden on the government.

He attributed the improvement to the ministry's performance and the measures taken to reduce losses in the power sector.

Government reviews electricity subsidy mechanism

The Awais Leghari also addressed concerns over the existing electricity subsidy system, under which consumers using up to 200 units per month fall within the subsidized category, while crossing the threshold can result in a significant increase in the applicable electricity rate.

He acknowledged the issue and said the government was working on a comprehensive programme to prevent consumers from losing their protected status for six months after exceeding the 200-unit limit by even one unit.

He explained that setting a consumption threshold inevitably creates a point at which the applicable rate changes, regardless of whether the limit is set at 200 or 250 units.

The minister said consumers using fewer than 200 units effectively pay around Rs13 per unit instead of the actual rate of approximately Rs35 per unit, with the government providing a subsidy equivalent to roughly 60-65%.

He added that the number of consumers benefiting from the protected category had increased from around 10 million to 22.5 million over the past two years.

However, he pointed out that the existing system also benefits some higher-income households that use solar panels to reduce their grid electricity consumption to below 200 units, despite not necessarily qualifying as financially deserving of the subsidy.

Subsidies to be linked to income levels

The Awais Leghari said the government was working on a revised subsidy mechanism under which assistance would be directed towards people living below the poverty line and those belonging to the lower-middle-income group, rather than being determined solely by monthly electricity consumption.

Under the proposed approach, eligibility for subsidies would not depend exclusively on the number of electricity units consumed.

He said the government was considering increasing the consumption limit from 200 to 250 units and introducing a system under which eligible consumers would continue receiving the subsidy in months when their consumption remained within the prescribed limit.

The proposed mechanism would also aim to prevent consumers from losing their protected status for six months because of a temporary increase in electricity consumption.

The minister said detailed work on the proposal was underway and would require approximately one to one and a half months to reconcile the relevant figures.

He concluded by stressing that protecting the interests of poor people was among the government's primary responsibilities.

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