Government is likely to fail its subsidy target

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Government is likely to fail  its subsidy target

Islamabad- Although the PML-N government has earmarked Rs240.4 billion for subsidies to energy companies and commodities like sugar and wheat in the budget for 2013-14, yet it is likely that it would go beyond the target.

The subsidy earmarked for 2013-14 is higher than the original estimate of Rs208.58 billion for 2012-13. According to revised estimates, the figure has gone up to Rs367.47 billion in the outgoing year, mainly due to a surge in power subsidy.

In the new fiscal year beginning July, total subsidies have been estimated at 0.92% of GDP. With the help of subsidies, the government is targeting to provide some 'cushion' to the consumers in supply of power, wheat, sugar, rice and other products.

For agricultural tube wells, the government had paid Rs870 million subsidy by bearing 12.5 percent share in Sindh, Punjab and KPK but in the new budget, no money was allocated for this purpose. The government continued subsidy for agri-tube wells in Balochistan, which is Rs3 billion for the new financial year against the Rs4 billion earmarked in the last budget.

The government has allocated a gigantic amount of Rs165.1 billion for subsidising the power sector out of which Rs150 billion will go for tariff differential claims between power distribution companies, Rs12 billion will be used to pick up receivables of Fata, Rs100 million will cover exchange rate differential for US Agency for Industrial Development (USAID) grant to Gencos, and Rs3 billion will cover tariff differential for agricultural tube wells in Balochistan. An additional subsidy of Rs55 billion will go to KESC consumers.

In the outgoing year, the government had allocated subsidy of Rs134.97 billion for the power sector, which later swelled to Rs264.97 billion. An amount of Rs120 billion had been earmarked for tariff differential between distribution companies, but it soared to Rs250 billion due to inefficiency and bad governance in power companies as well as unchecked electricity theft.

The past PPP government had frozen the power tariff for political gains, which resulted in subsidies exceeding the allocated amount. The government had allocated Rs50.3 billion subsidy for KESC consumers, which surged to Rs 84.3 billion according to revised estimates.

In 2012-13, the Trading Corporation of Pakistan (TCP) had been allocated Rs10 million to subsidise sugar. However, in the new budget, the government has scrapped plan of allocating amount for TCP to subsidise commodities.

The government has allocated Rs6 billion for the Utility Stores Corporation (USC) out of which Rs2 billion has been earmarked for Ramazan package and Rs4 billion to subsidise sugar.

The amount for Pakistan Agriculture Storage and Services Corporation (Passco) was increased from Rs6 billion to Rs5.148 billion for wheat purchase and to maintain reserves at stable price.

Rs4 billion was allocated for oil refineries and oil marketing companies; Rs231 million for Fauji fertilizer Bin Qasim, Rs283 million for sale of wheat in Fata, Rs 815 million for sale of wheat in Gilgit-Baltistan and Rs5 million for sale of salt in Gilgit-Baltistan.

Courtesy: Nation

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