The 200-unit subsidy is ending. Blame the IPPs, not the poor.

Ending the 200-unit subsidy

Pakistan has agreed with the IMF to end, by January 2027, the subsidy on the first 200 units of electricity. Muzamil calls this “a bada important ek step” because roughly 86% of the country’s electricity consumers use less than 200 units a month, meaning the vast majority of the country has been paying a subsidized rate for power. He states it plainly: “Poora Pakistan effectively subsidy ke upar chal raha hai,” the whole of Pakistan is effectively running on subsidy.

The populist outrage misses the math

Muzamil says the immediate reaction to the news was predictable: people arguing the government is punishing the poor while protecting free electricity units for its own employees. He doesn’t dismiss the concern, but he does the arithmetic. Even accounting for every government employee who still receives free or discounted units, that group is a small slice of consumption next to the 84-86% of the population receiving a subsidized rate. The subsidy isn’t a rounding error being defended by a few insiders, it’s the base case for the entire country, funded either through taxes on the salaried class or through borrowed money that eventually has to be repaid. As he puts it, “It’s not free money.”

What the Prophet said about fixing prices

Rather than argue from pure economics, Muzamil opens with a hadith he says is rarely taught, cited across Sunan Abi Dawood, Jami at-Tirmidhi, and Sunan Ibn-e-Majah, and verified by scholars including Sheikh Muhammad Nasiruddin al-Albani. In it, people ask the Prophet to fix prices that had risen sharply. His reported response: “Indeed, Allah is the One who fixes prices, who takes and gives, withholds and provides lavishly, and He is the Provider, and I hope that when I meet Allah, none of you will have any claim against me for any injustice regarding blood and property.” Muzamil reads this as a scholarly consensus that the state cannot arbitrarily fix prices, prices move with natural fluctuation, with one exception: when a market is being deliberately manipulated, the response is to go after the manipulation, not to impose a price ceiling. He extends the same logic to Pakistan’s DC-rate culture around food, arguing that price controls “has never worked” anywhere and that they produce an inefficient economy, because an economy runs on underlying productivity, not on the number printed on a receipt.

Blanket subsidies get gamed by people who don’t need them

Muzamil argues that a subsidy applied to everyone under 200 units, rather than targeted at people who are actually poor, invites abuse. He says he personally knows people, describing them as well-off, upper-middle-class households, who install two or three separate meters in one home specifically to keep each meter’s usage under the subsidized threshold. The mechanism designed to protect the poor ends up subsidizing people who don’t need it. His alternative: use the data Pakistan already collects, passport records, mobile and banking data, wallet transaction history, to identify genuinely poor households and send them cash directly, the same approach used for COVID relief and flood disbursements. Consumers would then pay the real cost of electricity and decide for themselves whether to conserve, install solar, or absorb the cost.

Free markets should cut both ways

This is where Muzamil separates his position from the government’s. He supports ending the consumer subsidy, but only if the same free-market logic is applied to the other side of the ledger: the independent power producers holding sovereign guarantees and dollar-pegged, take-or-pay contracts. He states it directly: “50% of the electricity cost today is actually capacity payment,” meaning half of what Pakistanis pay for power isn’t tied to electricity consumed at all. If the government is willing to renegotiate a subsidy that protects the poor, he argues, it should be equally willing to renegotiate contracts that protect wealthy local investors and industrial groups he names, including Sitara, Nishat, and Engro. Consumers face free-market discipline; IPPs, in his telling, do not.

The real elite capture

Muzamil widens the frame to argue that the loudest voices demanding price controls, he names Jamaat-e-Islami specifically, are aiming their criticism at the wrong target. The people who actually extract value from the system, he argues, are the industrialist-politicians and rent-seeking elite: agricultural landowners who classify unrelated income as tax-free farm income, and the LNG terminal deal tied to Shahid Khaqan Abbasi and Engro’s board, where a missing force majeure clause reportedly costs Pakistan roughly half a million dollars a day in payments to Qatar. Muzamil argues the blame belongs there, not with the household trying to keep its electricity bill under 200 units. He closes by naming himself, Muzamil Hasan Zaidi, signing off as always with an invitation to push back on his argument rather than simply react to it.