Rs50bn extra subsidies to power consumers: Planning ministry defies ECC decision
According to sources, the Planning Ministry has referred to a letter from the Finance Division dated May 16, 2025, and an Office Memorandum (OM) from the Power Division dated June 5, 2025, regarding the ECC's May 5, 2025 decision on 'tariff rationalization for the power sector – waiver of rebasing for up to 200 units.' The Planning Ministry argues that, under the Public Finance Management (PFM) Act 2019, funds under the Public Sector Development Program (PSDP) are to be allocated and released solely for duly approved development projects.
The Ministry pointed out that the Federal Cabinet had approved the Rs50 billion reallocation from the PSDP during its meeting on July 8, 2024, based on a summary from the Power Division. However, the Finance Division subsequently revised the PSDP 2024–25 allocation downward—from Rs1,400 billion to Rs1,100 billion—via an Office Memorandum issued on July 26, 2024. As a result, ministries and divisions collectively surrendered Rs300 billion to absorb the reduction.
Ministry seeks Rs1.6trn PSDP: FY26 budget on June 2
The Planning Ministry has stated that, in light of this overall reduction, it cannot surrender an additional Rs50 billion at this stage. However, it has no objection if the Finance Division reallocates the required funds from the Rs300 billion already surrendered by other ministries under PSDP 2024–25. It has advised the Power Division to approach the Finance Division accordingly.
Official documents reveal that the ECC, on May 5, 2025, had directed the Planning Ministry to surrender Rs50 billion from the PSDP to the Power Division as part of the government's commitment to meet circular debt (CD) targets agreed with the International Monetary Fund (IMF).
The Power Division had earlier informed the ECC that the Prime Minister's Office, on May 13, 2024, instructed it to finalize a plan for off-grid energy solutions, including the solarization of tube wells in Balochistan, for the FY 2024–25 budget.
Subsequently, consultative meetings were held under the chairmanship of the Minister for Power and the Chief Minister of Balochistan. The sessions were attended by the Ministers for Commerce and State for Power, provincial ministers, secretaries, and energy experts.
The recommendations from these meetings were presented to the Prime Minister on February 2, 2024. It was agreed to solarize approximately 27,000 agricultural tube wells, each eligible for compensation of up to Rs2 million, contingent upon disconnection from the national grid. The cost—estimated at Rs55 billion—would be shared between the federal government (70%) and the Balochistan government (30%).
A detailed agreement, including implementation mechanisms via Standard Operating Procedures and a Steering Committee, was signed on July 8, 2024, by the Power Division Secretary and the Chief Secretary of Balochistan. The Cabinet gave formal approval on July 31, 2024.
So far, Rs14 billion has been released via a Technical Supplementary Grant (TSG) from the National Food Security and Research Division's budget under the Prime Minister's National Programme for Solarization of Agricultural Tube Wells.
The Power Division informed the ECC that the remaining Rs24.5 billion would need to be provided from the Rs50 billion additional subsidy allocation proposed by the Finance Division. It emphasized that, in order to meet the revised CD flow target of Rs337 billion by June 2025, it must utilize the entire Rs1.229 trillion subsidy allocated for the power sector.
The Cabinet's July 8, 2024, approval to reallocate Rs50 billion from the PSDP to fund tariff differential subsidies is part of this subsidy allocation. While the Power Division agreed to allocate funds from its existing budget in the short term, it requested that any shortfall be reimbursed in June 2025 to meet IMF-agreed CD targets.
To address the issue, the Power Division submitted two proposals: (i) Finance Division should surrender Rs50 billion from PSDP to the power subsidy lump provision in Demand No. 45, as per the Cabinet's July 8, 2024 approval; and (ii) a Technical Supplementary Grant of Rs24.5 billion should be transferred from Demand No. 45 of the Finance Division to Demand No. 33 of the Power Division, for the implementation of the solarization project in Balochistan.
Copyright Business Recorder, 2025
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