The government has committed to abolishing the Rs. 140 billion cross-subsidy currently extended to protected and some non-protected gas consumers, replacing the existing consumption-based relief system with targeted financial support for low-income households through the Benazir Income Support Programme.

According to a report published in the national press, the transition to the new tariff structure must be completed by January 2027 under a structural benchmark agreed with the International Monetary Fund.

Under the proposed framework, protected and certain non-protected consumers will no longer receive subsidized gas through lower slab rates. Instead, all consumers will be charged the full average gas tariff, while eligible low-income households will receive direct support through BISP based on income data rather than gas usage.

Officials said the change is part of broader efforts to reform the energy sector and reduce distortions in gas pricing.

At present, the Rs. 140 billion subsidy is being financed through cross-subsidies imposed on captive power plants operated by export industries, general industry, commercial consumers, CNG stations, cement manufacturers, and high-end domestic users.

The average gas tariff currently stands at Rs. 1,750 per MMBtu.

Officials said the federal government does not directly finance subsidies for protected and non-protected consumers through the budget. Instead, lower-end domestic users are currently supported through higher tariffs charged to industrial and commercial sectors.

Once the new system is implemented, all categories of consumers are expected to pay the uniform average gas tariff of Rs. 1,750 per MMBtu, effectively bringing the current cross-subsidy mechanism to an end.