Govt to continue subsidies for USC

Cost to be paid out of funds released under PM’s Rs50b relief package

Shahbaz Rana January 29, 2021
The ECC referred the National Electricity Policy 2021 to the Cabinet Committee on Energy (CCOE) for consideration. PHOTO: PPI


The government on Thursday decided to continue to pay subsidies on five essential food items for six more months amid disclosure that the Rs50 billion relief package that the prime minister announced for providing subsidised goods through the Utility Stores Corporation (USC) had remained fully unspent.

The Economic Coordination Committee (ECC) of the cabinet, which took the decision to provide subsidies on essential food items, deferred decision on a proposal of USC to increase prices of these items by reducing the subsidy amount.

“The ECC approved the proposal regarding continuation of general subsidy on five essential items through USC from January 1, 2021 to June 30, 2021 out of funds allocated under the Prime Minister’s Relief Package-2020 in the backdrop of the Covid-19 pandemic,” stated the Ministry of Finance.

The cost of subsidies for six months would be paid out of the Rs10 billion that had been released under the PM’s Rs50 billion relief package but had remained unutilised, the ECC was informed.

Under the PM’s USC relief package of Rs50 billion for procurement and subsidy on five commodities in the aftermath of Covid-19, the USC told the ECC, “Rs10 billion has been released which has so far not been utilised”.

The Rs50 billion was part of the PM’s Rs1.24 trillion relief package. A UK-funded study has recently revealed that so far Rs297 billion could be utilised against the PM’s corona relief package.

The government sells sugar, wheat, wheat flour, ghee and rice at reduced rates through the utility stores. The Ministry of Industries - that administers the USC - had proposed to increase prices of these commodities due to surge in their rates. But the ECC did not agree to the proposal and directed the ministry to present a formula for determining prices of these items and the subsidies required.

The government had approved Rs71 billion for the USC to provide five essential commodities at subsidised rates for 2020. Out of the sum, so far only Rs21 billion or 29.5% of the allocation could be utilised, according to the Ministry of Industries’ documents.

An amount of Rs10 billion was used for the purchase of goods and the actual subsidies that were given to the people were just Rs11 billion.

The Rs21 billion that had actually been utilised was approved before Covid-19 hit Pakistan, showed the official record. Of this, Rs6 billion had been approved by the federal cabinet in December 2019 and Rs15 billion was approved in February 2020, according to the Ministry of Industries’ record.

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“USC intimated that prices of five essential commodities had changed substantially in the open market since the time these were fixed with approval of the cabinet.” USC had requested an increase in prices of sugar, wheat flour and ghee.

The ECC also decided that the USC would present a revised proposal after working out specific percentage ranges of differential from market prices for subsidising essential commodities through Ministry of Industries and Production before next ECC meeting, stated the finance ministry.

The percentage ranges would serve as a benchmark for subsidising the essential commodities through USCs, keeping in view fluctuations in international commodity prices, it added.

The ECC approved, in principle, re-allocation of Rs2.3 billion for laying infrastructure for automation of stock management throughout the network of USCs.

The ECC deferred the textile policy approval for the third consecutive time. It also set up a committee to review the proposal of increasing profit margins of oil marketing companies and dealers.

The ECC approved cover for sovereign guarantees and payments of power purchase cost for 300 megawatts Gwadar power plant, to be set up under the China-Pakistan Economic Corridor (CPEC). It approved implementation agreement, supplemental agreement and power purchase agreement for 300MW Coal Power Project at Gwadar, said the finance ministry.

The CPEC project will be completed at a cost of $500 million and will run on imported coal. The company is required to achieve financial close by this Sunday and start commercial operations by June 2023. It will produce electricity at Rs8.1227 per unit.

The CIHC company is required to execute implementation agreement and power purchase agreement. The implementation agreement provides protection against expropriation, political force majeure risk, changes in laws and also lays down provisions of compensation amounts in case of termination of the implementation agreement.

The ECC approved the establishment of Ziarat Directorate Office at Quetta and Taftan at an estimated expenditure of Rs38.50 million. Moreover, the ECC also considered the establishment of Ziarat Directorate Offices at Mashhad (Iran), Karbala and Baghdad (Iraq) and directed the Ministry of Religious Affairs to seek formal consent/approval from the host countries through the Ministry of Foreign Affairs.

The National Electricity Policy 2021 was placed before the ECC by the Power Division. After detailed discussion, ECC referred the above policy to Cabinet Committee on Energy (CCOE) for consideration with the advice that the policy may be referred back to ECC (with recommendations) if the subject falls in the domain of the ECC. The committee further directed to take all provinces on board during consultative process.

Published in The Express Tribune, January 29th, 2021.

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