The government has earmarked Rs208.59 billion for subsidies to energy companies and commodities like sugar and wheat in the budget for 2012-13, but it is unclear whether it will keep itself within the ceiling or grossly overshoot the target as has been done in the outgoing fiscal year.
Though the subsidy earmarked for 2012-13 is higher than the original estimate of Rs166.448 billion for 2011-12, according to revised estimates, the figure has gone up to Rs512.29 billion in the outgoing year, accounting for 2.5% of gross domestic product (GDP) mainly due to a surge in power subsidy.
In the new fiscal year beginning July, total subsidies have been estimated at 0.9% of GDP compared to original estimate of 0.8% of GDP in 2011-12. With the help of subsidies, the government is targeting to provide some ‘cushion’ to the consumers in supply of power, oil, wheat, sugar, rice and other products.
For agricultural tube wells, power subsidy had been scrapped in 2011-12, but in the new budget, the government has re-introduced the subsidy and allocated around Rs5 billion for the farmers. For subsidy on sugar, Rs4 billion has been set aside.
The government has allocated a gigantic amount of Rs134.97 billion for subsidising the power sector. Of this, Rs120 billion will go for tariff differential claims between power distribution companies, Rs10 billion will be used to pick up receivables of Fata, Rs100 million will cover exchange rate differential for US Agency for Industrial Development (USAID) which is running a tube well replacement programme, Rs870 million will be utilised for clearing 12.5% subsidy on power bills of agricultural tube wells in Sindh, Punjab and Khyber-Pakhtunkhwa and Rs4 billion will cover tariff differential for agricultural tube wells in Balochistan. A subsidy of Rs50.317 billion will go to KESC consumers, which is in addition to the Rs134.97 billion figure.
In the outgoing year, the government had allocated subsidy of Rs122.7 billion for the power sector, which later swelled to Rs419.018 billion. An amount of Rs50 billion had been earmarked for tariff differential between distribution companies, but it soared to Rs412.018 billion due to inefficiency and bad governance in power companies as well as unchecked electricity theft.
Stay orders granted by courts in cases related to power tariff also prevented the government from increasing the tariff and pushed up the subsidy. The government has also picked up Rs55.7 billion in interest payment for term finance certificates (TFCs) floated with the aim of clearing inter-corporate debt of the energy chain.
In 2012-13, the Trading Corporation of Pakistan (TCP) will get Rs10 million to subsidise sugar. In the outgoing year, Rs4 billion had been earmarked for commodities, but the amount went up to Rs18.252 billion due to subsidy of Rs16.9 billion for sugar, Rs217 million for import and export of wheat and Rs1.082 billion for rice sales.
The government has increased subsidy to Rs6 billion for the Utility Stores Corporation (USC) against Rs2 billion in 2011-12, given for Ramazan package only.
An amount of Rs5.148 billion has been allocated to Pakistan Agriculture Storage and Services Corporation (Passco) for wheat purchase and to maintain reserves to stabilise prices.
In the outgoing year, Rs4.074 billion was allocated for subsidy on wheat stocks and moong purchase, which rose to Rs18.69 billion due to additional subsidy of Rs4.171 billion on wheat purchase and Rs10.455 billion on paddy purchase.
Published in The Express Tribune, June 2nd, 2012.
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