Despite overall subsidy cuts, K-Electric secures Rs163 billion allocation, becoming the biggest beneficiary in the 2026-27 power budget
KARACHI: While the federal government plans to reduce overall power sector subsidies in the upcoming fiscal year, Karachi-based utility K-Electric has emerged as the biggest beneficiary, securing a hefty 30 percent increase in tariff differential subsidy under the budget for 2026-27.
Budget documents reveal that K-Electric will receive Rs163 billion in tariff differential subsidy during fiscal year 2026-27, significantly higher than the Rs125 billion allocated in the outgoing fiscal year. The increase comes despite broader efforts by the government to curb subsidy spending and improve fiscal discipline.
The latest budget estimates show that total power sector subsidies will decline to Rs830 billion in 2026-27 from Rs893 billion in the current fiscal year. However, K-Electric’s allocation has bucked the trend, sparking questions over the government’s continued preferential treatment toward the country’s sole vertically integrated power utility.
The subsidy increase translates into an additional Rs38 billion for K-Electric at a time when several other subsidy programs are either being reduced or kept largely unchanged.
According to the subsidy breakdown, support for agricultural tube wells in Balochistan has been cut to Rs3 billion from Rs4 billion. Similarly, the subsidy for the merged districts of Khyber Pakhtunkhwa (erstwhile FATA) has been reduced to Rs34 billion from Rs40 billion.
The government has also allocated Rs248 billion for inter-DISCO tariff differential subsidies, almost unchanged from Rs249 billion in the outgoing fiscal year.
Meanwhile, tariff differential subsidies for Azad Jammu and Kashmir (AJK) have been increased to Rs81 billion from Rs74 billion, while the allocation for the Pakistan Energy Revolving Fund (PERA) remains unchanged at Rs48 billion.
A major portion of the subsidy package, Rs252 billion, has been earmarked for the containment of the country’s ever-growing circular debt crisis, which continues to plague Pakistan’s energy sector and public finances.
Energy sector analysts note that the increase in K-Electric’s subsidy allocation comes amid persistent concerns over power sector inefficiencies, rising electricity tariffs, and the mounting burden on taxpayers. They argue that despite repeated reforms, the government continues to rely heavily on subsidies to bridge tariff gaps and maintain power sector operations.
With K-Electric securing one of the largest increases in subsidy allocations despite overall spending cuts, the budget figures are likely to reignite debate over the fairness and sustainability of Pakistan’s power subsidy framework and the growing fiscal cost of keeping the lights on.
