ISLAMABAD: The government has committed to the International Monetary Fund (IMF) to abolish the Rs140 billion cross-subsidy currently provided to protected and some non-protected gas consumers, replacing the existing consumption-based support system with targeted subsidies based on household income through the Benazir Income Support Programme (BISP).
Senior Petroleum Division officials told The News that the transition to the new tariff structure must be completed by January 2027 under an IMF structural benchmark. Under the proposed regime, protected and certain non-protected consumers will no longer receive subsidised gas tariffs through lower slab rates. Instead, all consumers will be charged the full average gas tariff, while eligible low-income households will receive direct financial support through BISP based on income data rather than gas consumption levels. “We will have to complete the transition by January 2027 under the structural benchmark of the IMF programme,” senior officials said.
At present, cross-subsidies worth around Rs140 billion are being financed by captive power plants (CPPs) operated by export industries, general industry, commercial consumers, CNG stations, cement manufacturers and high-end domestic consumers. The average gas tariff currently stands at Rs1,750 per MMBtu. Officials clarified that the federal government does not directly finance subsidies for protected and non-protected gas consumers through the budget. Instead, lower consumer categories are subsidised through higher tariffs imposed on industrial and commercial sectors.
Following the implementation of the new regime, all categories of consumers are expected to pay the uniform average gas tariff of Rs1,750 per MMBtu, effectively ending the cross-subsidy mechanism.
