ISLAMABAD: The federal government on Wednesday approved Rs23 billion worth of subsidy for providing cheap electricity to five major export sectors in the current fiscal year by diverting funds meant for the supply of cheaper gas and utilising savings in the Public Sector Development Programme (PSDP).
For the next fiscal year 2020-21, the Economic Coordination Committee (ECC) of the cabinet also approved a subsidy of Rs20 billion for the five export-oriented sectors, which will be allocated in the next budget.
“The ECC approved a proposal by the Power Division for a special relief package to further continue provision of subsidised electricity until June 2020 to five export-oriented sectors,” said a statement issued by the Ministry of Finance after the meeting.
Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh, who chaired the ECC meeting, directed that the authorities concerned should make sure that the subsidy was given only to those units that exported goods and was not availed by local industries.
He set up a committee to devise a mechanism for better utilisation of the approved subsidy. The ECC put off a decision on increasing the wheat support price by another Rs35 to Rs1,400 per 40 kilogramme - the second time in the past four months.
It would meet again on Thursday to consider the proposal, which would require the reversal of its November 2019 decision when it rejected the Ministry of National Food Security’s proposal to fix the support price at Rs1,400.
The ECC on Wednesday again took up a summary for electricity supply at an all-inclusive rate of 7.5 cents per unit under an agreement to the five export-oriented sectors. Last week, it could not take a decision due to a lack of fiscal space.
Power Minister Omar Ayub Khan and the finance ministry had refused to foot the bill in the March 5 meeting. Later, Prime Minister Imran Khan intervened and the finance ministry finally created fiscal space by diverting funds from other areas, including cutting the PSDP.
The Power Division estimated the cost of subsidy till June 2020 at Rs23 billion, excluding the impact of fuel price adjustment, Neelum-Jhelum surcharge and other fixed charges.
In a summary, the Power Division proposed that out of the Rs23 billion, an amount of Rs14 billion would be diverted from the original subsidy allocation of Rs24 billion for cheaper gas supply to industries. The remaining Rs9 billion will be provided through savings in the PSDP, according to the ministry. The ECC approved the subsidy arrangement, which also indicated that the Pakistan Tehreek-e-Insaf (PTI) government would not be able to fully utilise the Rs701-billion PSDP.
Planning Minister Asad Umar has repeatedly said that he will ensure spending of the entire PSDP of Rs701 billion in current fiscal year 2019-20.
In light of the fresh ECC decision, the five export-oriented sectors would now be issued new electricity bills. Industrialists had agitated against the government’s decision to suddenly send them electricity bills at double the agreed rate. The government sent the electricity bills to the export units due to a lack of fiscal space in the budget.
The ECC also approved a proposal by the Ministry of Energy for two amendments aimed at ensuring ease of doing business for the upstream petroleum sector.
The amendments were related to the extension of exploration licences beyond two years by the ECC rather than the minister in charge of the Petroleum Division and the creation of new Zone-1 (F) for an onshore licensing regime and consequent revision in the zonal map.
Wheat support price
The ECC also discussed the proposal of increasing the wheat support price to Rs1,400 per 40 kg and would convene a special session to discuss a detailed plan to keep flour prices at the lowest possible level throughout the year in view of any increase in the support price and incidental charges for the supply of Passco-procured wheat to provinces and allied issues related to wheat procurement by the provinces and the private sector, said the Ministry of Finance.
In November last year, the ECC approved an increase of 5% or Rs65 in the wheat support price that reached Rs1,365 per 40 kg. The wheat price had been hiked after over five years. Earlier, it had fixed the price at Rs1,350 but the federal cabinet did not endorse it and sought a review.
At that time, Federal Minister for National Food Security and Research Makhdoom Khusro Bakhtiar pushed for setting the price at Rs1,400 per 40 kg but other ECC members did not agree.
The ECC also approved National Telecommunication Corporation’s revised budget estimates for 2018-19 and 2019-20. The ECC gave, in principle, approval to a proposal of 22.5 million Saudi riyal in equity investment abroad by Eastern Products (Pvt) Ltd, Pakistan.
Published in The Express Tribune, March 12th, 2020.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.