Cabinet surprised Rs4 trillion subsidies, grants

The federal cabinet was surprised to learn on Tuesday that the government gives a subsidy of over Rs4 trillion annually and the total volume of subsidies and grants forms 4.5% of the gross domestic product (GDP).

In the weekly meeting, Prime Minister’s Special Assistant for revenue Dr Waqar Masood gave a detailed briefing to the ministers on rationalisation of subsidies and grants and presented a comparative overview of revenues and expenditure, subsidies and grants for the last 13 years.

At present, Dr Masood said, most of the sectors of the economy, including energy, agriculture, industry and others, are being given subsidies and grants which is putting undue burden on the national exchequer. “At present, the total volume of subsidies and grants is 4.5% of GDP,” he said.

Though the Federal Minister for Information and Broadcasting Shibli Faraz repeatedly put the figure at Rs4 trillion in the post-cabinet meeting press conference, Dr Masood, while talking to The Express Tribune, said that the subsidies and grants were about Rs2 trillion, which is 4.5% of GDP.

“There is a potential loss of Rs5 trillion that could happen on failure of those investments, loans and guarantees that are in loss and not recognised as such,” Dr Masood revealed. “This is 23% of domestic debt,” he added.

In the cabinet meeting, chaired by Prime Minister Imran Khan, Dr Masood presented proposals to the ministers regarding targeted subsidies and suggested that the Ehsaas database be used to provide targeted subsidies to the poor.

The prime minister said that the real beneficiaries of subsidies and grants are the poor but, at present, the subsidy is equally available to both the rich and the poor. Imran directed that a mechanism of “targeted subsidy” should be devised, which would benefit the poor and backward areas in particular.

Prime Minister Imran also directed for a detailed review of all the sectors in which targeted subsidy could be given to the poor and backward areas, as well as a comprehensive plan with a period of implementation.

After paying debt and interest on it, Shibli revealed that everything, including the budget for the government, defence and everything else, is being run on loans. On top of that, he maintained, the government gives direct and indirect subsidy on wheat, electricity, gas and other things and everyone automatically avails the subsidy even if he deserves or not.

Unfortunately, the minister said, the county was run on ad-hoc basis and no long-term policies were made during the past four to five decades. He added that the system of subsidies given by the government was faulty as both billionaires and the poor equally benefit from it.

Wheat support price

Meanwhile, the information minister said that the cabinet discussed the support price for wheat. The prime minister also sought cabinet members’ opinion to reach a consensus, he added. After deliberation, Faraz said, it was decided that the wheat support price would be Rs1,650 per 40 kgs.

Reportedly, Rs1,650 per 40 kgs is about 27% lower than the prevailing market rates. However, the minister insisted that the government had to take care of the farmers as well as the people, therefore, “it is a price which will make both the farmers and the people happy”.

After Punjab, Faraz said, Sindh is the largest contributor – 13 to 16% – of wheat but “it did not release a single grain of wheat”, which led to its shortage. Holding the Sindh government responsible for the crisis, he reiterated that Sindh government forced its people to buy flour at a higher price and the effects of the decision were felt in other provinces as well.

The minister revealed that the Sindh government did not buy a single grain of the wheat in the last year and the federal government had provided approximately 700,000 tons of wheat through the Pakistan Agriculture Storage and Services Corporation (Passco). He accused the Sindh government of disrupting the whole supply chain by not releasing wheat as required and offering a higher support price for wheat.

“Prime Minister and our government’s top priority is that the price for flour is not increased,” Faraz said, adding that the Sindh government’s support price for wheat was even higher than the international market’s price – a rare happening.

During the meeting, the cabinet approved the proposal for giving the Trade Development Authority of Pakistan (TDAP) the status of registrant under the Geographical Indication Registration.

The approval has been given to accord a distinct identity to Pakistani products in the world, especially after India’s claim of exclusive rights over the use of Geographical Indication (GI) tag to basmati rice in the European Union.

Pakistan’s special products include basmati rice, kinnow, mango, Ajrak, cutlery etc are linked to the geographical identity of the country and because of these products, Pakistan’s exports have a unique identity.

An official statement said that the cabinet endorsed the decisions taken at the meeting of the Economic Coordination Committee held on October 28, adding it also ratified the decisions taken at the meeting of the Committee on Energy on October 29.

The cabinet approved in principle the establishment of the Digital Cooperation Organization proposed by the Saudi Arabian government. The institute will help in the development of the information technology sector among the countries of the region.

Meanwhile, planning minister Asad Umar, who heads the National Command and Operation Centre (NCOC), briefed the cabinet on the current situation regarding the Covid-19 pandemic, saying that the rate of increase in the spread of coronavirus was showing an upward trajectory.

While urging the nation to take precautionary measures, the prime minister directed the NCOC to formulate a strategy to deal with this situation without affecting employment. In the meeting, the cabinet decided in principle that no public meeting would be held by the government during this period.

Karachi incident

While replying to the questions during the press conference, Faraz appreciated the self-discipline and accountability mechanism of the armed forces in relation to the Karachi incident. He said that military side has done its job and now the Sindh government should set an example with regards to how the police offices resorted to a sort of mutiny and fix the responsibility how it all happened.

Faraz said the Sindh government should also check why the FIR was not registered initially by the SHO concerned, “which led to a resentment and reaction from public and pressure came on the Rangers and they approached high official of police to sort out this issue.”

The minister was of the opinion that the Sindh government should ensure that discipline is maintained by all and the IG also conducts an inquiry regarding his officers.