Pakistan Assures IMF of Ending Rs140bn Gas Cross-Subsidy by Jan 2027

Pakistan has assured the International Monetary Fund (IMF) that it will abolish the existing Rs140 billion gas cross-subsidy system by January 2027, replacing it with targeted financial assistance for low-income households through the Benazir Income Support Programme (BISP).

According to senior officials from the Petroleum Division, the transition is part of a structural benchmark agreed under the IMF programme. Under the new mechanism, protected and certain non-protected gas consumers will no longer receive subsidised tariffs based on gas consumption slabs.

Instead, all consumers will be charged the full average gas tariff, currently estimated at Rs1,750 per MMBtu. Eligible low-income households will then receive direct financial support through BISP, based on income data rather than gas usage.

Officials said the current cross-subsidy system is funded through higher tariffs imposed on captive power plants (CPPs), export industries, commercial consumers, CNG stations, cement manufacturers, and high-end domestic users.

The government clarified that these subsidies are not financed directly through the federal budget. Rather, the burden is shifted to industrial and commercial sectors through elevated gas prices.

Once the new tariff regime is implemented, all consumer categories are expected to pay a uniform gas tariff, effectively ending the long-standing cross-subsidy mechanism.