The federal government is preparing a major reform that could change how electricity and gas bills are calculated in Pakistan. Officials are considering a household income bills based pricing system that would link energy tariffs to household earnings instead of consumption levels.
The proposed change forms part of broader economic reforms connected to Pakistan’s agreement with the International Monetary Fund under the Extended Fund Facility program. Authorities aim to restructure the energy sector, improve subsidy targeting, and reduce long standing financial inefficiencies.
Under the existing system, electricity and gas tariffs depend on the number of units consumed. Consumers fall into different pricing slabs, and higher usage often results in higher rates. However, policymakers believe this model does not accurately reflect a household’s financial capacity. As a result, subsidies sometimes benefit consumers who may not require financial assistance.
Shift toward income based subsidy system
The new proposal seeks to determine subsidies based on verified household income bills. Officials plan to introduce a mechanism that evaluates earnings and allocates support accordingly. The system may integrate with existing social protection databases to identify eligible consumers more accurately.
Authorities say the goal is to ensure that low and middle income households receive targeted relief, while higher income consumers pay closer to the actual cost of energy. This approach aims to make subsidy distribution fairer and more efficient.
Government officials confirmed that discussions with the IMF include revisions to electricity tariff structures. The Fund has emphasized that reforms should protect vulnerable groups while improving financial sustainability in the energy sector.
The reform agenda also targets the reduction of cross subsidies, a practice where certain consumer categories indirectly cover costs for others. Policymakers believe restructuring tariffs could help address Pakistan’s circular debt problem, which continues to place pressure on public finances and energy companies.
Energy experts note that implementing an income based system will require reliable income verification mechanisms and coordination between multiple government departments. Digital databases and social welfare programs may play a key role in ensuring transparency and accuracy.
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If approved, the reform would represent one of the most significant changes to Pakistan’s energy pricing framework in recent years. While officials continue consultations, the proposal signals a shift toward aligning subsidies with economic need rather than electricity or gas consumption alone.
The government has not yet announced a timeline for implementation. However, ongoing negotiations and policy discussions suggest that energy sector reforms will remain a central focus of economic planning in the coming months.
