Last updated: 03/5/2024

Programme Details

Programme objectives

This move aims to provide relief to consumers and address the financial challenges faced by the energy sector.

However, in July 2023, Pakistan reached an agreement with the IMF for $3 billion that mandated the government remove energy and fuel subsidies, move to a market-based exchange rate, and increase taxes. the financial challenges faced by the energy sector.

References
(i) Human Rights Watch. 2024. Pakistan Events of 2023. Accessible at https://www.hrw.org/world-report/2024/country-chapters/pakistan. Accessed on 05 April 2024 (ii) Profit Pakistan Today. 2023. Powering ahead: Govt boosts subsidy allocation to address energy sector challenges in FY2023-24. Accessible: https://profit.pakistantoday.com.pk/2023/06/11/powering-ahead-govt-boosts-subsidy-allocation-to-address-energy-sector-challenges-in-fy2023-24/#:~:text=ISLAMABAD%3A%20The%20government%20has%20unveiled,portion%20of%20the%20subsidy%20allocation.
Coverage
The largest group benefitting from the subsidy is households with consumption between 301-700 units, which accounts for 56pc of the consumers or nearly 16.8 million households.
Programme expenditure
0.6 percent of GDP in the 2015/16 fiscal year. Subsidies for the lifeline tariff comprise a small part of overall subsidy expenditure (8.5 per cent). The government’s initial budgeted subsidy for the ongoing fiscal year 2022-23 was Rs664 billion. However, due to various factors, including higher payments to Independent Power Plants (IPPs), the actual subsidies swelled to Rs1,103.077 billion.
References
(i) IMF. 2017. Pakistan: Selected Issues. Country Report No. 17/213. International Monetary Fund Middle East and Central Asia Department. <http://www.imf.org/en/Publications/CR/Issues/2017/07/13/Pakistan-Selected-Issues-45079>. Accessed 30 Nov 2023 (ii) Profit Pakistan Today. 2023. Powering ahead: Govt boosts subsidy allocation to address energy sector challenges in FY2023-24. Accessible: https://profit.pakistantoday.com.pk/2023/06/11/powering-ahead-govt-boosts-subsidy-allocation-to-address-energy-sector-challenges-in-fy2023-24/#:~:text=ISLAMABAD%3A%20The%20government%20has%20unveiled,portion%20of%20the%20subsidy%20allocation.

Targeting and eligiblity

Eligibility criteria
The utility companies have some data on customers that could be used to determine eligibility. However, these data are unlikely to be good proxies for poverty, and may suffer from inaccuracies or be missing for some households. A preferred option would be to use the existing National Poverty Registry to objectively determine which households are poorest. The National Poverty Registry (NPR) is a national database of poverty scores for each household in Pakistan that is used to deliver other social assistance to the poor (most notably BISP benefits). Poverty scores are a significantly better indicator than electricity use for targeting subsidies. Targeting the bottom 40 percent of households based on their poverty scores would capture the majority of poor households with electricity access.

Coverage and other information

Amount of benefits
The amount of subsidy reduces with the increase of the consumption of the electricity units. The subsidy amount (approximately Rs1,800) is highest for households consuming around 300 units.
Benefit delivery mechanism
The government transfers the money to the electricity companies that provide consumers with the service
References
IMF. 2017. Pakistan: Selected Issues. Country Report No. 17/213. International Monetary Fund Middle East and Central Asia Department. <http://www.imf.org/en/Publications/CR/Issues/2017/07/13/Pakistan-Selected-Issues-45079>. Accessed 30 Nov 2023