KP Merged Districts See Rs. 37 Crore Reduction in Overall Federal Allocations as Development Funds and Electricity Subsidy Cut
PESHAWAR — While the federal government has announced a significant Rs. 15 billion increase in the annual grant for tribal districts in the Budget 2026-27, a sharp reduction in development funds and electricity subsidies has resulted in a net decline of Rs. 37 crore in total federal resources flowing to Khyber Pakhtunkhwa’s merged districts.
In what the Khyber Pakhtunkhwa government has hailed as a major achievement, the federal government has increased the annual grant for merged tribal districts from Rs. 80 billion to Rs. 95 billion — an addition of Rs. 15 billion. However, analysts warn that the increase is significantly offset by cuts in two other critical areas.
Budget documents reveal that allocations under the Public Sector Development Programme (PSDP) for tribal districts have been reduced from Rs. 65.44 billion in the current financial year to Rs. 56.07 billion in the upcoming year — a reduction of Rs. 9.37 billion. This steep cut raises serious concerns about the pace of infrastructure development and public service delivery in already underdeveloped merged districts.
The electricity subsidy provided to power distribution companies operating in tribal areas has also been reduced. The current year’s allocation of Rs. 40 billion has been trimmed to Rs. 34 billion for the next fiscal year — a cut of Rs. 6 billion. This reduction is likely to have a direct impact on electricity affordability for residents of merged districts, who already face significant energy access challenges.
When the Rs. 15 billion grant increase is weighed against the combined Rs. 15.37 billion reduction in development funds and electricity subsidies, the net result is a shortfall of Rs. 37 crore in overall federal resources available to tribal districts. Despite the headline-grabbing grant increase, the ground reality points to tighter fiscal conditions for these regions.
Ten-Year Development Plan Takes a Hit
The federal budget has also cut funding for the merged districts’ ten-year development plan by Rs. 10 billion — from Rs. 37 billion to Rs. 27 billion. This reduction threatens the long-term development trajectory of a region that was formally merged with KP in 2018 and has since relied heavily on federal support for socioeconomic uplift.
On a positive note, the dedicated development programme for merged districts has seen a modest increase of Rs. 1 billion, rising from Rs. 28 billion to Rs. 29 billion for the upcoming fiscal year.
A Mixed Budget for Merged Districts
The Budget 2026-27 presents a complex and mixed picture for KP’s tribal districts. While the federal government’s decision to raise the annual grant signals a degree of commitment to the region, the simultaneous reduction in development funds and energy subsidies undermines the net benefit. Civil society groups and political representatives from the merged districts are expected to raise concerns over what they describe as a politically motivated optics exercise — a large grant increase masking deeper resource cuts.
Key Figures at a Glance
| Allocation Head | Current Year | Next Year | Change |
|---|---|---|---|
| Annual Grant | Rs. 80 billion | Rs. 95 billion | +Rs. 15 billion |
| PSDP Development Funds | Rs. 65.44 billion | Rs. 56.07 billion | −Rs. 9.37 billion |
| Electricity Subsidy | Rs. 40 billion | Rs. 34 billion | −Rs. 6 billion |
| 10-Year Development Plan | Rs. 37 billion | Rs. 27 billion | −Rs. 10 billion |
| Merged Districts Programme | Rs. 28 billion | Rs. 29 billion | +Rs. 1 billion |
This story is based on federal budget documents for the fiscal year 2026-27 relating to merged tribal districts of Khyber Pakhtunkhwa.
