Reviewing the Electricity Subsidy: The Gap Between the 200-Unit Threshold and Poverty-Based Targeting

Pakistan's electricity subsidy debate often revolves around the 200-unit threshold. But what happened in the Senate is a document I would want to record in my notebook — because here, statements are being counted, and it is from the counting of statements that the truth of policy emerges.

Hook

In a report published on March 12, 2026, with a Reuters photograph, Energy Minister Awais Ahmad Khan Leghari told the Senate that electricity subsidies would now be provided 'based on poverty' rather than the 200-unit threshold. In the same session, it was also said that the threshold could be raised to 250 units. Two statements, from the same platform, and between them lies a tension that can only be understood through an arithmetic of claims. I have been tracking Pakistan's energy policy for some years now, and this is not the first time the gap between 'poverty-based' and 'unit-based' has made headlines.

Context

Pakistan's power sector is trapped in a complex financial structure. Circular debt — the cycle of arrears among power producers, transmission and distribution companies, which is further inflated by shortfalls in government subsidies — is currently stated at around Rs1.67 trillion. The government claims it is declining and will be eliminated within four years, along with the removal of the debt-servicing surcharge.

But the weakest link in this entire framework is 'targeting' — who gets the subsidy and who does not. Currently, it is based on monthly consumption of 200 units. The Minister says it will now be changed to poverty-based targeting, so that wealthy people cannot install solar and bring their consumption below 200 units to avail the subsidy. This argument sounds correct — but it contains a fundamental contradiction that cannot be ignored.

Core Analysis

First, let us count the facts. The statement in the Senate contains three main claims: first, the basis of the subsidy will change; second, the 200-unit threshold may be raised to 250 units; third, 20 million consumers use less than 200 units and 'most' of them are using solar.

Here the first contradiction emerges. If most of the 20 million are using solar, then solar is no longer just a rich man's hobby — it is within reach of the common man. In such a scenario, saying that 'rich people are installing solar to take advantage of the subsidy' is only partially true. Rather, it proves that solar has now become a mass movement, and targeting the subsidy simply by excluding the rich will not work.

Second contradiction: the Minister says the subsidy will be based on poverty, but immediately afterwards a proposal for a 250-unit threshold comes up. This threshold is also unit-based. That means in the transitional arrangement, the same old mechanism will remain which is being talked about replacing. Poverty-based targeting requires a solid mechanism — such as an income-based registry like BISP — but the report does not say anywhere what that mechanism will be.

Third, the financial side. The government claims that budgetary support has fallen from Rs1.18 trillion to Rs700 billion. This is a reduction of about 41 percent. But it is not clear what period this figure is compared to. Also, a reduction in DISCO losses is claimed, but no numbers are given. And most importantly — the Minister himself admitted that this benefit has not yet reached consumers.

There is a deeper point hidden here. If budgetary support is falling and consumers are not getting relief, it means the savings are being retained by the government or the distribution companies, not reaching the common man. This is a distributional choice, not a technical outcome.

Contrarian Angle

It is generally believed that cutting subsidies is necessary to reduce circular debt. But in this case, one should look at the opposite. If the government is promising to eliminate circular debt in four years and remove the surcharge, the question is: after the surcharge is removed, who will bear the burden of debt servicing? If from the budget, where will that budget come from? And if by raising tariffs, consumers will again be burdened.

Second, the idea of 'poverty-based' subsidy is good, but the income-verification mechanism needed to implement it is not yet developed in Pakistan. In such a situation, the proposed 250-unit threshold is actually a practical compromise — not an ideal solution. But if this compromise also fails to exclude the rich, then the entire objective of reform is at risk.

Takeaway

One thing is clear from this whole episode: the question of electricity subsidy is not just economic, but political too. The statements made in the Senate have now become part of the record, but the mechanism behind them is still unclear. In the coming months, when the notification for 250 units comes, it will be known whether the government has taken concrete steps towards poverty-based targeting or whether this remains just an announcement. In my notebook, this date is recorded — and the next time electricity subsidies are discussed in the Senate, I will count how many new figures have emerged this time.