The federal government is preparing a major restructuring of electricity and gas tariffs by shifting from usage-based slabs to an income-based pricing model as part of ongoing reforms linked to the International Monetary Fund program.

Officials said the proposed system aims to determine subsidies based on household income rather than consumption levels. The change is expected to create a more targeted support mechanism, ensuring that financial assistance reaches only deserving and low-income households.

The reform plan is being finalized under commitments made in the International Monetary Fund Extended Fund Facility, which requires Pakistan to improve efficiency in its energy sector and reduce financial losses.

Currently, electricity tariffs are calculated through slab-based consumption, where prices increase with higher usage. The new model would assess income data — possibly integrated with existing social protection systems — to allocate subsidies more accurately and reduce cross-subsidization.

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Officials stated that higher-income households would pay closer to actual energy costs, while protections would remain for lower and middle-income groups. Authorities also emphasized that discussions with the IMF are ongoing to ensure the transition does not negatively impact vulnerable consumers.

The broader reform agenda includes reducing energy sector circular debt and improving financial transparency in power distribution companies.

Analysts believe the shift could significantly reshape Pakistan’s energy pricing structure and improve fiscal stability if implemented effectively.