Subsidy allocation jacked up by 18.4% to Rs174.7 billion

Consumers of electricity and commodities will receive some relief

ISLAMABAD: The government on Friday increased the subsidy allocation by 18.4% as it presented the last budget of its tenure for next fiscal year 2018-19, which would provide some relief for the consumers of energy and commodities and may help the ruling party in winning over voters in the next general elections.

According to the budget book, the subsidy release has been estimated at Rs174.74 billion for the upcoming fiscal year, which is 25.9% and 18.4% higher than the budget and revised estimates for 2017-18.

In FY18, the government initially expected to disburse Rs138.8 billion in subsidy, but later the projection went up to Rs147.6 billion in the wake of rise in subsidy for K-Electric, power distribution companies and fertiliser manufacturers.

For the next fiscal year, the subsidy for Water and Power Development Authority (Wapda) and Pakistan Electric Power Company constitutes the major component with a 76.7% share in the total allocation.

It was followed by the subsidy for Pakistan Agriculture Storage and Services Corporation (Passco) and K-Electric with shares of 10.9% and 8.8%, respectively.

In the outgoing year, Wapda had been earmarked 37.8% of the total subsidy whereas Passco and K-Electric were allocated 11.9% and 11.2% respectively. As a percentage of gross domestic product (GDP) - the total size of national economy - the subsidy ratio has inched up to 0.5% for FY19 compared to the 0.4% estimated in the FY18 budget.

With the fresh allocation, the government expects to provide some cushion for the consumers of electricity, wheat, sugar, pulses, rice and tea. However, it remains unclear whether the state will be able to keep itself within the ceiling or overshoot the target as happened in the outgoing year.

According to the budget documents, Rs134 billion has been set aside for subsidising power companies, excluding K-Electric.

Of this, Rs105 billion will cover tariff differential claims of power distribution companies whereas Rs12 billion will be utilised to pick up receivables of the Federally Administered Tribal Areas (Fata) compared to Rs10 billion in the current fiscal year.

For the outgoing year, Rs102 billion had been earmarked for the tariff differential claims, but actual disbursements came down to Rs81.5 billion.

Separately, Rs5 billion has been set aside for subsidising agricultural tube wells in Balochistan next year. In comparison, Rs8.5 billion had been allocated for the outgoing year.

Wapda will get a subsidy of Rs12 billion in FY19 whereas for K-Electric the subsidy amount has been slashed to Rs15.4 billion.

For the Karachi utility, the government had allocated Rs15.5 billion for the outgoing year, but actual amount swelled to Rs33.4 billion according to revised estimates.



Essential goods

The government has increased the subsidy on the sale of commodities for the next fiscal year as the Utility Stores Corporation will receive Rs6 billion compared to Rs4 billion for the outgoing year.

Of this, Rs3 billion will be spent on clearing arrears of sugar sale and Rs2 billion will cover the Ramazan package. Apart from these, Rs1 billion has been set aside for subsidising the sale of pulses, rice and tea. The cushion for Passco has been ramped up to Rs19.04 billion against the target of Rs16.54 billion this year, which will go for wheat purchase and keeping its reserves to stabilise market prices.

However, according to revised estimates actual subsidy disbursement went up to Rs17.54 billion in FY18.

In the outgoing year, Rs10.7 billion had been earmarked for subsidising fertiliser sales, but the government has allocated only Rs1 million for the next fiscal year. For the sale of wheat in Fata, Rs300 million has been set aside.

Published in The Express Tribune, April 28^th, 2018.

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