The government on Thursday approved a Rs60 billion relief package to provide five essential goods to poorer households at subsidised rates, a 71% increase from the previous allocation due to a significant rise in prices over the past year.
The decision was made by the Economic Coordination Committee (ECC) of the Cabinet, led by Finance Minister Muhammad Aurangzeb. In addition to the relief package, the ECC also approved industry status for the warehousing and logistics sector. This decision followed the transfer of the Secretary of Industries, as the previous secretary had opposed the proposal due to constitutional and legal challenges.
The Cabinet Committee approved the continuation of the Prime Minister's Relief Package for fiscal year 2024-25 through the Utility Stores Corporation, with revised prices and subsidies. According to a brief statement issued by the Ministry of Finance after the ECC meeting, the government has already allocated funds in the budget, so no new money will be required to finance the package. Of the Rs60 billion, Rs10 billion will be allocated to fund the Ramazan Relief Package.
Additionally, Rs1 billion from the Rs60 billion will go to the Federal Board of Revenue (FBR) to cover the tax on the subsidy. In the previous fiscal year, the government had allocated Rs35 billion to subsidise five essential goods through the government-owned chain of utility stores. The increase to Rs60 billion is due to the significant rise in the prices of wheat flour, rice, sugar, ghee, and pulses.
Last year, the government provided an average targeted subsidy of Rs2,734 per household through the utility stores. This amount has now increased by one-fourth, raising the per-household subsidy to Rs3,650, according to the ECC's decision.
Each household identified through the Benazir Income Support Programme will receive a subsidy of Rs1,700 per 20kg bag of wheat flour. Additionally, a subsidy of Rs50 per kg will be provided for sugar, Rs100 per kg for ghee, Rs50 per kg for pulses, and Rs100 per kg for low-quality rice through the utility stores.
Average inflation during the last fiscal year remained over 23%, marking another year of high double-digit inflation. While the government has been addressing the needs of a small portion of the population through subsidised essential items, the remaining population continues to face market-driven prices.
The finance ministry further stated that the ECC approved the Ministry of Industries & Production's request to declare the Warehousing and Logistics Sector as an industry. Businesses gaining industry status are exempted from minimum equity requirements and can borrow from the central bank in excess of their capital. The warehousing and logistics sector will now be eligible for tariff concessions on machinery imports, paying only 5% customs duty and zero sales tax. The industry will also receive new concessions on industrial and gas charges.
The Board of Investment conditionally supported the move to grant industry status to the warehousing business, with the caveat that the consent of the Council of Common Interest be sought in light of the 18th constitutional amendment.
In April, the prime minister, during his visit to the Karachi Chamber, had declared the intent to grant industry status to the warehousing sector. However, federal bureaucracy was initially reluctant to move forward, arguing that under the constitution, industry is a provincial matter. The prime minister then transferred the Secretary of Industries and brought in a new secretary to ensure his orders were implemented.
On Thursday, the acting Secretary of Finance also expressed reservations about granting industry status and suggested first seeking the endorsement of the Law Division. However, the ECC rejected her proposal and approved the summary.
Provincial governments have endorsed the proposal, though the Sindh government provided conditional support, stating that industry status should be granted only if it aligns with existing rules and regulations.
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