Targeted power, gas subsidy planned
In a recent cabinet meeting, the finance adviser announced that concrete proposals were being drawn up to ensure that the subsidy reached the intended beneficiaries. PHOTO: FILE
The government is working on a plan to introduce a new mechanism for doling out subsidy to the targeted consumers of electricity and gas.
At present, the subsidy on electricity and gas supply is given on the basis of units consumed by consumers across the board. However, in the new mechanism, the subsidy will be given only to the targeted consumers by linking them with the Ehsaas programme survey.
According to budget documents, Rs124 billion has been set aside for the provision of subsidy to electricity companies, excluding K-Electric, in the current financial year.
In comparison, Rs191 billion had been allocated in the previous fiscal year but the subsidy was revised upward to Rs201 billion later as bill payments by power consumers decreased due to the widespread impact of coronavirus.
In the case of gas, the government has been giving subsidy to the export-focused sectors on supply of imported liquefied natural gas (LNG). Separately, a cross-subsidy system is in place for locally produced gas where commercial and industrial sectors bear the impact of low prices for the domestic consumers.
In the new mechanism, the subsidy will be given to the targeted consumers who will be identified through a survey.
Sources told The Express Tribune that the Ministry of Finance was working on a proposed plan in that regard.
In a recent meeting of the cabinet, Adviser to Prime Minister on Finance and Economic Coordination Committee (ECC) Chairman Abdul Hafeez Shaikh announced that concrete proposals were being drawn up to ensure that the subsidy reached the intended beneficiaries.
Special Assistant to Prime Minister on Social Protection and Poverty Alleviation Sania Nishtar informed cabinet members that she was working with the energy ministry on identifying the consumers who would be provided electricity and gas subsidy through linkage with the Ehsaas survey.
Agricultural subsidy
The Ministry of National Food Security and Research has prepared a relief package for the agriculture sector in a bid to cope with the impact of Covid-19 pandemic.
Under the package, a subsidy of up to Rs37 billion will be given on urea and di-ammonium phosphate (DAP) fertilisers, which will directly benefit farmers. In addition to this, the government is proposing to bear 10% interest on the agricultural loans taken by the farmers. However, policymakers were divided over the criteria of disbursing the agricultural package. They discussed at length the farm subsidy under the prime minister’s fiscal package.
Some of the policymakers were of the opinion that the subsidy should target only the small farmers. However, others were of the view that the rationale behind agricultural subsidy was not poverty alleviation, as for that there were other social safety programmes in place, but to enhance farm productivity.
An across-the-board subsidy irrespective of the landholding was, therefore, in line with the objective, they argued.
At present, the government is giving fertiliser subsidy to the farmers through fertiliser manufacturers. Policymakers, however, believe the impact of the subsidy given on gas supply to fertiliser manufacturers was not being passed on to the farmers.
Published in The Express Tribune, August 11th, 2020.
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