Government plans to end gas subsidy system, new policy likely to be implemented by January 2027

The government has started preparing for large-scale reforms in the gas sector, under which a proposal to phase out the current subsidy system and provide direct financial assistance to low-income consumers is under consideration.

According to sources, under the new policy, subsidies on gas and electricity will not be given on the basis of consumption but keeping in mind the income and financial status of the consumers. For this purpose, it has been proposed to use data from the Benazir Income Support Program (BISP) so that government assistance can be limited to only deserving families.

According to officials, consideration is being given to abolishing the current cross-subsidy system, which gives discounts to domestic consumers by putting additional burden on the industrial and commercial sectors. The move is expected to provide relief to industries, CNG sector, commercial establishments and the cement industry.

Sources say the government is also considering introducing an average uniform gas tariff for all consumers. Currently, the average gas tariff in Islamabad is around Rs 1,750 per MMBTU, but protected consumers are still paying lower rates.
Under the new policy, direct cash assistance or targeted subsidies will be provided to low-income households to reduce the burden of energy costs.

According to energy experts, the current subsidy structure is not only increasing the financial pressure on the gas sector but is also leading to an increase in industrial costs, which affects the competitiveness of the export sector.

According to sources, the government plans to completely eliminate most of the subsidies on gas by January 2027 to reduce the fiscal deficit and bring transparency in the energy sector.

Officials say the reforms aim to ensure the efficient use of government resources, reduce fiscal pressure, and ensure that subsidies reach only deserving consumers.