As per the Budget Book released on Tuesday, the overall subsidy outlay for FY26 is estimated at Rs1.186 trillion, a decline from the current year s revised allocation. A substantial portion—Rs1.03 trillion—will be directed toward the power sector, down from Rs1.19 trillion this year.
Earlier, subsidies worth Rs1.36 trillion were allocated for the power sector and other items, which later increased to Rs1.378 trillion according to the revised estimates for the current fiscal year.
Despite the reduction, the government intends to offer financial relief in areas like electricity, petroleum, food, urea, wheat, and housing finance. However, it remains uncertain whether the government can keep its subsidy spending within the new ceiling, as it exceeded the target in the ongoing year.
For the Inter-Disco tariff differential, the government has allocated Rs249 billion, a drop from Rs276 billion. Similarly, funding for merged districts of Khyber-Pakhtunkhwa, including the FATA subsidy, has been lowered to Rs40 billion from Rs65 billion.
The subsidy for Azad Jammu and Kashmir’s tariff differential has also been cut to Rs74 billion from Rs108 billion. The allocation for the Pakistan Energy Revolving Fund (PERA) remains unchanged at Rs48 billion.
K-Electric’s tariff subsidy has been reduced to Rs125 billion for the upcoming fiscal year, compared to Rs171 billion this year. However, support for agriculture tubewells in Balochistan for KE users has doubled to Rs1 billion from Rs500 million.
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Rs95 billion has been set aside for payments to Independent Power Producers (IPPs), despite no initial allocation for them last year, although Rs115 billion was later provided.
Subsidies for petroleum have dropped significantly to Rs1.2 billion, down from Rs18.4 billion. Likewise, the amount to cover the shortfall in Pakistan Electric Power Company’s (PEPCO) guaranteed throughput has been halved to Rs1.2 billion from Rs2.4 billion.
The Rs6 billion previously allocated for Asia Petroleum s shortfall has been discontinued for next year. Moreover, no allocation has been made for domestic consumers of SNGPL in FY26, unlike the Rs10 billion earmarked this year.
The subsidy for the Pakistan Agricultural Storage and Services Corporation (PASSCO) has increased to Rs20 billion, up from Rs12 billion. This includes Rs14 billion for wheat stockpiles and Rs6 billion for the price gap in wheat sales.
For industries and production, subsidy allocations have been cut to Rs24 billion from Rs68 billion. Out of this, Rs9 billion is designated for electric vehicle incentives and Rs15 billion to settle sugar subsidy arrears of the Utility Stores Corporation. There is no budget for the Ramazan or PM relief packages.
Conversely, the allocation for ‘other subsidies’ has been raised to Rs104 billion from Rs75 billion (which was revised to Rs90 billion). This includes Rs20 billion for wheat subsidies in Gilgit-Baltistan and Rs15 billion for imported urea.
The Naya Pakistan Housing Authority has been allocated Rs1 billion, with an additional Rs7 billion earmarked for a mark-up subsidy and risk-sharing scheme under the Kissan Package, including support for farm mechanisation.
