Electricity and Gas Bills May Soon Be Linked to Consumers’ Income Levels

The federal government is moving forward with a major restructuring of electricity and gas tariffs by replacing the existing consumption-based slab system with an income-based pricing model, as part of energy sector reforms linked to the International Monetary Fund program. The proposed energy tariff reform aims to shift subsidy allocation from usage levels to household income, fundamentally changing how power and gas prices are calculated in Pakistan.

Under the new framework, subsidies on electricity and gas bills will be determined according to verified household income rather than the number of units consumed. This marks a structural departure from the current slab-based tariff mechanism, where consumers pay different rates depending on their monthly energy usage. The reform is being finalized in line with commitments made under the IMF’s Extended Fund Facility, which requires Pakistan to rationalize subsidies, reduce inefficiencies, and strengthen fiscal discipline in the energy sector.

Officials indicate that the new income-based subsidy model could be integrated with existing social protection and income verification systems to identify eligible beneficiaries. The objective is to ensure that targeted energy subsidies reach low-income and vulnerable households, while higher-income consumers pay tariffs closer to the actual cost of electricity generation and gas supply. Policymakers argue that this targeted subsidy framework will improve fairness, transparency, and efficiency in utility pricing.

Pakistan is currently engaged in discussions with the International Monetary Fund regarding electricity tariff revisions. The IMF has emphasized that any changes in power and gas pricing should protect lower and middle-income groups from additional financial strain. As part of the broader reform agenda, the government is also working to reduce cross-subsidies across consumer categories and address the persistent issue of circular debt in the power sector, which continues to weigh heavily on the national economy.

The planned overhaul of utility tariffs reflects a wider effort to stabilize the energy market, improve cost recovery, and align Pakistan’s subsidy regime with international financial commitments while maintaining social protection for deserving consumers.