Locking horns: Finance, power ministries in row over tube well subsidy

Both ask each other to approach cabinet for removal of subsidy.

ISLAMABAD:

The Ministry of Finance and the Ministry of Water and Power are locked in a row over subsidy of Rs16.4 billion for agricultural tube wells given by the previous government of Pakistan Peoples Party-led coalition and described as a move to win rural votes in upcoming elections.

Following hefty power subsidy and financial crunch, the overstretched finance ministry has refused to commit to releasing billions of rupees for subsidising the tube wells run by farmers to water their crops.

The previous government was considering giving Rs42 billion in subsidy, but the finance ministry fiercely resisted and the amount was brought down to Rs16.4 billion.

On the recommendations of a committee, led by former minister Manzoor Wattoo and comprising Naveed Qamar, Khurshid Shah and Qamar Zaman Kaira, the Ministry of Water and Power had proposed that Rs16.4 billion worth of subsidy should be provided at a flat rate of Rs8 per unit for tube wells compared to the existing rate of Rs11 per unit.

A cabinet meeting, presided over by then prime minister Raja Pervez Ashraf, later approved the summary on March 7.

Sources told The Express Tribune that the water and power ministry wrote a letter to the finance ministry, asking it to implement the cabinet decision and announce the flat rate of Rs8 per unit for tube wells. In reply, the finance ministry pointed to the financial constraints faced by it and said it could not release the subsidy.

“Therefore, the power ministry should send a summary to the cabinet for withdrawing the decision taken by the previous government regarding subsidy to the farmers on tube wells,” a source said quoting a letter written by the finance ministry.

In another letter, the water and power ministry made it clear that it was not opposed to the subsidy, therefore, it could not seek its withdrawal from the cabinet. Rather, according to sources, it asked the finance ministry to approach the cabinet for the purpose.

“You differed over the decision taken by the previous government and therefore you should go to the cabinet,” the power ministry told the finance ministry.

Separately, the caretaker government on Friday announced that it would inject Rs45 billion as additional subsidy into the power sector to ensure fuel supply to power plants to control outages. It also declared that the caretakers would not increase the power tariff, leaving the matter to the next elected government.

So far this fiscal year, the finance ministry has provided more than Rs268 billion worth of subsidy to the power sector in shape of tariff differential claims compared to the target of Rs185 billion. Government estimates suggest that the subsidy will reach Rs291 billion by the end of the current fiscal year in June.

Published in The Express Tribune, April 28^th, 2013.

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