Targeted power subsidies under BISP: Roadmap submitted to IMF and World Bank
The move is part of a broader energy sector reform aimed at reducing inefficient consumption, curbing losses, and supporting Pakistan's climate mitigation goals. The current subsidy structure—characterized by blanket tariff differentials and cross-subsidies—has led to overconsumption and has often benefited wealthier consumers, undermining the sector's financial viability.
The design has jointly been prepared by a Committee headed by PASS Division and issues and bottlenecks removed. Direct subsidy reform is also part of the RSF program of the IMF as a major reform measure.
IMF assured: Power, gas subsidies will be aligned with BISP
Accordingly, after a series of meetings between Power, BISP and the Finance Division and with the support of World Bank, a draft road map was prepared and shared with the IMF during recent meetings. As per the new timelines agreed with IMF identification and verification of eligible consumers to be completed by December 31, and June 2026, the government has to finalize the criteria and from FY 2027 budget there shall be no Tariff Differential Subsidy (TDS) but the allocation will be for direct subsidy to only eligible consumers and final timeline to shift on this roadmap is January 2027.
The sources said Minister for Power has taken the first review of roadmap and has directed Power Planning and Management Company (PPMC) to evaluate impact on consumers which is expected by mid-May 2025 followed by the plan to be presented to the Prime Minister after which Cabinet approval shall be initiated, expected by mid-June 2025.
The sources further stated that the government has assured the IMF that electricity and gas subsidies will be aligned with the BISP to ensure that only low-income households benefit from the relief, sources in the Finance Ministry revealed. A similar approach is under consideration for gas subsidies, with an assessment due by June 2026 to determine feasibility.
Additionally, to boost energy efficiency, Pakistan will enforce Minimum Energy Performance Standards (MEPS) for appliances such as fans, LEDs, refrigerators, ACs, and motors by June 2027.
New procurement regulations mandating MEPS compliance at federal and provincial levels will be introduced by December 2025. The National Energy Efficiency and Conservation Authority (NEECA) will begin quarterly reporting on MEPS adoption starting December 2025.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
4 hours ago
- Express Tribune
At least 14 civilians killed by Sudanese paramilitaries fleeing besieged city
A woman prays by one of the makeshift graves of those buried in Khartoum's southern suburb of al-Azhari on August 2, 2025 when the area was under control of the Rapid Support Forces (RSF) paramilitaries, which will be exhumed for reburial in the local AFP Listen to article Sudanese paramilitary fighters have killed at least 14 civilians trying to flee a besieged city in Darfur, a rights group said Monday, more than 27 months into their war against the army. The Emergency Lawyers, which documents atrocities in the war between the Rapid Support Forces and the Sudanese army, said that "dozens more were injured and an unknown number of civilians detained" in the paramilitary attack on Saturday on the outskirts of El-Fasher city, in the western Darfur region. The RSF has in recent days launched its latest attack on El-Fasher, the North Darfur state capital which it has besieged since May 2024 but has been unable to seize from the hands of the army. Read More: 74 migrants die as boat sinks off Yemen Just two days before Saturday's attack, the RSF's political administration urged residents to evacuate to Qarni village, where the Emergency Lawyers says the civilians were killed. "I call on you to leave El-Fasher and head to Qarni, the northwest gate of the city, where our forces and the Tasis alliance forces are located and will ensure your safety," the RSF-appointed Darfur governor Al-Hadi Idris said in a video address on Thursday. Tasis is an RSF-led political alliance which late last month named leaders of a government based in South Darfur state capital Nyala. Also Read: China and Russia start joint drills in Sea of Japan The UN has repeatedly warned of the plight of hundreds of thousands of civilians trapped in El-Fasher with virtually no aid or services. Families have survived on animal feed, a shortage of which was announced last week. Since April 2023, the war between the army and the RSF has killed tens of thousands, torn the country apart, and created what the UN has called the world's largest hunger and displacement crises. If the RSF captures El-Fasher, it will control all of Sudan's vast western region of Darfur and, along with its allies, much of the country's south.
Express Tribune
16 hours ago
- Express Tribune
Learning from Russia's supply-side flat tax reforms
US and Russian officials met in Saudi Arabia on Tuesday for the first high-level talks between the two countries since the Kremlin's full-scale invasion of Ukraine nearly three years ago.. PHOTO: FILE Listen to article Between 1998 and 2000, the Russian economy was down to its knees. The government was severely underfunded with an inefficient tax system marked by high tax rates and rampant tax evasion. The central bank of Russia was forced to finance government spending by printing rubles, leading to hyperinflation, debt default and the devaluation of the currency. The newly appointed Russian President Vladimir Putin embarked on a pro-growth agenda; so good that it made the anti-growth IMF sick to its stomach. Keeping the IMF at bay, Putin implemented a tax reform policy taken page after page from the supply-side playbook, creating a structure of incentives that fuelled production and investment. His tax reform hit the entire spectrum of producers from individuals to large corporations to small entrepreneurial ventures. Putin firmly committed himself to his aggressive agenda, reducing fears that tax reforms would be temporary. He made tax evasion less profitable and integrated an underground economy that thrived for years with an above-ground market economy. Russia's recovery, effective January 1, 2001, started with a flat 13% personal income tax applicable to worldwide income received by Russian tax residents. The flat rate replaced a progressive tax structure that ranged from 12-35%. Applicable income included earnings, bonuses and other forms of compensation. There was no capital gains tax and gains from the disposal of assets were taxed at a flat 13% rate. Gains from real estate held for more than five years and other assets held for more than three years were exempted from income tax. Effective January 1, 2001, under payroll taxes, the Unified Social Tax replaced payments by corporate taxpayers to four separate off-budget funds: the pension fund, social insurance fund, medical insurance fund and employment fund. The combined tax burden used to be 38.5% of annual gross salaries paid by employers, and in addition, employees paid 1% of their salaries to the pension fund. Later, these taxes were combined and collected as one single tax payable by employers and were regressive in nature. The tax had been levied on the following scale: 35.6% on the first RUB 100,000 ($3,200) of income; 20% on earnings from RUB 100,000 ($3,200) to RUB 300,000 ($9,600); 10% on earnings from RUB 300,000 ($9,600) to RUB 600,000 ($19,000) and 5% on all earnings above RUB 600,000 ($19,000) (reduced to 2% in 2002). The employee contribution was eliminated. Effective January 1, 2002, Russia implemented a new corporate profit tax of 24%, reduced from 35%. Dividend income received by Russian organisations from domestic organisations was taxed at 6%, lowered from 15%. The new lower tax rate came at a cost of some former tax benefits, including the capital investment allowance that allowed corporations to reduce their effective tax burden significantly, but also included improved depreciation rules. VAT (value-added tax) was still levied at a standard rate of 20% with a few exceptions taxed at 10%. Sales tax was levied by regional officials but in most cases set at a maximum of 5%. Effective January 1, 2003, a new tax system was implemented for small businesses that have less than 20 employees and earn less than RUB 10 million ($320,000) in annual sales. Such qualifying companies were able to choose between paying 8% of annual gross revenues or 20% of annual net profits. They were also able to write off 100% of capital expenditure immediately. This new tax system was in lieu of tax payments for the Unified Social Tax, VAT, sales tax, property tax and corporate profit tax for these companies. Under the existing tax law for small businesses, up to 50% of operating capital was estimated to be lost to taxes and regulatory fees. Effective July 1, 2001, the mandatory surrender of export earnings was reduced from 75% to 50%. This liberalisation of currency controls meant that Russian companies must now only sell 50% of foreign currency earnings in exchange for rubles. Turnover taxes, considered very detrimental to investment climate, since even unprofitable companies can suffer substantial taxation, were completely wiped out of the Russian tax code. Under land reform, a new land code had been adopted, confirming the right to private property for both foreign and Russian citizens by legalising the ownership of urban land. The aim was to enhance property rights and encourage private ownership as well as encourage the use of property as collateral in transactions. Transparency in real estate transactions was a key component for attracting foreign investment in Russia. Putin knew that his No 1 priority was economic growth. Despite sharply lowering tax rates across the broad, tax revenue as a share of GDP expanded robustly under the new tax regime. Tax revenue increased 51% in 2001 over collections in 2000, expanding from 11% to 16% of GDP. The Russian economy continued to grow robustly, which led to budget surpluses and the government's fiscal balance sheet in a very positive position. Annual growth went up from 2% to an average of 7% and the budget deficit from 2% to a surplus of 3% of GDP. Another key area of concern regarding Russia's future was its foreign debt burden. The following three years of prosperity, starting in 2001, allowed the government to accelerate its external debt repayments, in such a way that the external debt, which was at 130% of GDP in 1999, went down to 50%. Putin's most significant accomplishments had been the achievement of political stability. Such stability served as a catalyst for a revised risk analysis concerning foreign and domestic investment in Russia, integrating the country into the modern industrial global economy by transitioning from a centrally controlled command economy to a market-based economy. The positive economic development in Russia led to a consistent upgrading of its sovereign credit rating from CCC- (1998) to B+ (2002) and an outlook upgrade from stable to positive, with reform momentum and the commitment to timely debt service cited as key factors for the change in the outlook. Russia's renaissance is proof that supply-side economic reforms and the flat tax works. The odds of Russian recovery, according to the IMF, were slim to none. The players, however, who bet on Russian red would have broken the bank. Russia had risen from ashes to establish herself as one of the global economy's bright spots. Even in 2001 with weaker oil markets, Russian equities significantly outperformed, the ruble remained stable and the economy continued to expand. Now, if only we in Pakistan could import these supply-side flat tax reforms, keeping the IMF at bay, to our shores! The writer is a philanthropist and an economist based in Belgium
Express Tribune
16 hours ago
- Express Tribune
Climate not behind agri-sector fall
Listen to article Pakistan's GDP growth exceeded expectations during FY24. It proved wrong everyone, including international organisations, experts, and policymakers. A deep dive into GDP data revealed that the major push came from agriculture. Despite bad governance, climatic factors, and a distorted market, agriculture showed remarkable performance. It posted a growth rate of 6.25%, driven by the crop sector, which grew by 11.3%. Unfortunately, agriculture struggled to sustain momentum in 2025. The growth rate dropped to 0.56% from 6.25% in 2024. The crop sector grew by -6.82% in 2025, compared to 11.3% in 2024. Major crops, such as wheat, sugarcane, cotton, and rice – key contributors to agricultural GDP — faced significant losses. Wheat experienced a negative growth rate of -8.9%, with the government attributing it to climate change and reduced production areas. Interestingly, for sugarcane and rice, although their cropping areas increased by 1.1% and 7.2%, respectively, their production decreased by -3.4% and -1.38%. Cotton saw the worst decline, contracting by 30.7%. These figures are very concerning given the ongoing issues of poverty, food insecurity, and unemployment in Pakistan. The World Bank estimated that about 44.7% of the population lives below the poverty line, which is a troubling statistic. Additional analysis reveals that 16.5% of the population is living in extreme poverty. They struggle to meet basic daily needs and face uncertainty about their future. It has also been predicted that the poor performance of agriculture has contributed to a 0.2% increase in poverty in rural areas. This is a serious situation. Poverty is growing, even though the government claims to be investing in poverty reduction programmes like the Benazir Income Support Programme (BISP). This also raises questions about the effectiveness and sustainability of BISP. Each year, Pakistan spends billions of rupees on BISP. But what is the result? Poverty keeps increasing. Second, food insecurity remains a major concern. A 2013 study estimated that 58.8% of Pakistan's population was food insecure. Unfortunately, we are still relying on old data because the government hasn't updated Pakistan's food insecurity data. There are concerns that food insecurity has risen over time due to various factors. First, poor economic conditions and the devaluation of the PKR have significantly reduced people's purchasing power, leaving fewer resources to buy healthy food. Second, weak governance of the agricultural sector has led to lower production and reduced availability of high-quality food. The government blames climate change for the poor performance, but a closer look at the data shows that isn't the full story. The true cause of the agricultural decline is poor governance – the government's consistent ignorance and pro-market, or specifically pro-private sector, policies. Now, under the International Monetary Fund (IMF) direction, Pakistan has left farmers at the mercy of the private sector and climate change. It devises and enforces policies that favour the private sector at the expense of farmers. For example, last year, the government allowed market forces or the private sector to dictate and control the agricultural input market. The private sector exploited farmers by manipulating prices and input availability. Farmers scrambled from one market to another to obtain inputs but faced numerous difficulties. Most farmers were unable to secure the necessary inputs at the right time, which negatively impacted crop production. The farmers were protesting and voicing their concerns, but the government refused to intervene. The government believed that interfering in the market would disrupt free market principles and was, therefore, unwilling to intervene. On the other hand, the government forgets the free-market principles when it comes to agricultural products. It artificially sets the prices of commodities and forces farmers to sell their commodities at government prices. For example, the Punjab government has announced the wheat price at Rs2,900 per 40kg. It is an injustice to the farmers because it is lower than the cost of production. The farmers claim that the cost of production for 40kg is around Rs4,000, and the Punjab government is asking them to sell wheat at Rs2,900. In this way, the farmers are incurring a loss of Rs1,100 per 40kg. Now, the question is why the government is interfering in the private market and forcing farmers to sell their product at a loss. Isn't it against the market law? The government claims that it wants to protect the poor. In this context, then, what about the poor farming community? Why should the government protect the poor at the cost of the poor farming community? The second example is the sugar crisis. First, the government allowed the sugar industry to export sugar, resulting in an abnormal price increase. Now, it is allowing the same sector to import sugar, and the arrival time will be during the crushing season. It will enable the industry to exploit farmers. The above discussion suggests that poor governance and government preferences are significantly impacting the agricultural sector, leading to the downfall of the farming community. Unfortunately, this policy is not limited to the present government; the successive governments, political and military, have systematically destroyed agriculture and the farming community. The fall of farmers will lead to the collapse of agriculture. It will impact the country on multiple fronts, including the unavailability or high cost of inputs, a sharp increase in unemployment, poverty, and food insecurity, among other consequences. Therefore, the government will have to take immediate steps to reverse the process. It will have to decide on the market structure, either to leave it to market forces with the invisible hand or to adopt a free market approach with the firm visible hand. It is suggested that the government should pursue a free market, but with a strong, visible hand, not an invisible one. Also, the government will need to develop policies that help farmers lower production costs and enable low-income consumers to afford food. One possible option can be a double-edged subsidy policy. On the one hand, subsidies should be limited to small farmers with landholdings of up to 12.5 acres, in different slabs. For example, farmers with less than one acre should be provided with essential inputs free of charge, and those with 2.5 acres should receive them at half price. Similarly, farmers with less than 7.5 acres should be given a 30% subsidy, and those with up to 12.5 acres should receive a 20% subsidy. Farmers with 25-50 acres should be entitled only to a 10% subsidy. A similar formula should be applied on the consumption side. Government should also divide the consumers into four groups: 1) group-1, people connected with BISP, 2) group-2, people with a monthly income of Rs50,000, 3) Rs100,000, and 4) above Rs100,000. The wheat distribution should be as Rs1200/40kg, Rs1800/40kg, Rs2200/40kg, and wheat at market price, among groups, respectively. This strategy will not only help farmers but also shield the urban poor. The same formula can be applied to other commodities, such as grams, onions, garlic, and meat. THE WRITER IS A POLITICAL ECONOMIST AND A VISITING RESEARCH FELLOW AT HEBEI UNIVERSITY, CHINA
