• New housing scheme gets Rs71bn
• Subsidy for electricity consumers reduced from Rs1.036tr to Rs830bn

ISLAMABAD: The federal government has slashed subsidies by eight per cent to Rs1,091 billion for 2026-27 against Rs1,186bn allocated for the outgoing fiscal year.

Incidentally, out of the Rs1,186bn allocated for FY26, actual spending remained at Rs1,157bn, mainly due to a decline in electricity-related subsidies. A new head, PM Apna Ghar Programme, has been created for FY27 with an allocation of Rs71bn.

However, an additional Rs127bn was spent in FY26 under the PM’s austerity measures outside the budget, amid the situation in the Middle East following the US-Israeli war on Iran.

The government was unable to utilise the total allocation earmarked for electricity consumers. Subsidies to the power sector were budgeted at Rs1,036.13bn in FY26, but actual spending remained at Rs893.136bn.

The government has now reduced the subsidy for electricity consumers from Rs1,036bn to Rs830bn for FY27.

The subsidy for tariff differential on agricultural tube wells in Balochistan was allocated at Rs4bn in FY26 and has been reduced to Rs3bn for FY27.

The allocation for inter-Disco tariff differential subsidy stood at Rs249.13bn in FY26 and has been reduced to Rs248bn in FY27.

The subsidy for the merged districts of Khyber Pakhtunkhwa (erstwhile Fata) amounted to Rs40bn in FY26 and has been cut to Rs34bn in FY27.

The tariff differential subsidy for Azad Kashmir was budgeted at Rs74bn in FY26 and has been increased to Rs81bn in FY27. The allocation for the Pakistan Energy Revolving Fund (PERA) remains unchanged at Rs48bn for the next fiscal year.

The subsidy to K-Electric for tariff differential was allocated at Rs125bn in FY26 and has been increased to Rs163bn in FY27. The subsidy to K-Electric for agricultural tube wells in Balochistan remains unchanged at Rs1bn for the next fiscal year.

Payments to IPPs (independent power producers) were budgeted at Rs95bn in FY26 but were revised upward to Rs200bn by the end of the year. No allocation has been made for IPPs in the next fiscal year.

The allocation for containment of circular debt has been set at Rs252bn for FY27, while the lump sum provision for power subsidy (circular debt) stood at Rs400bn in the last fiscal year before being reduced to Rs152bn by the end of FY26.

The food subsidy for Pakistan Agricultural Storage and Services Corporation (Passco) was budgeted and revised at Rs20bn and has been reduced to Rs19bn in FY27. Of the total, the subsidy to Passco for wheat reserve stocks stood at Rs14bn in FY26 and has been reduced to Rs9.5bn in FY27.

The subsidy to Passco for the cost differential on wheat sales stood at Rs6bn in FY26 and has been increased to Rs9.5bn in FY27.

The subsidy for industries and production was budgeted at Rs24bn and revised downward to Rs12.193bn during the ongoing fiscal year. It has been increased to Rs37bn in FY27, including Rs5.80bn for the production and supply of urea fertiliser and Rs8bn as an incentive under the Electric Vehicle Scheme.

Published in Dawn, June 13th, 2026