Subsidies worth Rs240b set aside for energy firms, commodities

Allocation is far lower than the amount doled out in outgoing year.

ISLAMABAD:

The government has set aside Rs240.4 billion as subsidy for energy companies and essential commodities like sugar and wheat in the budget for 2013-14, but it is unclear whether it will be able to keep itself within the ceiling or grossly overshoot the target as is the case in the outgoing fiscal year.

Though the subsidy for the new financial year beginning July is higher than the original estimate of Rs208.58 billion for 2012-13, it is far lower than the actual subsidy doled out in the outgoing fiscal year, which is estimated at Rs367.47 billion, thanks to the cushion provided to power companies.

When viewed as a percentage of the total size of economy, the subsidy will stand at 0.92% in the new fiscal year. With the help of subsidy, the government hopes to provide some ‘cushion’ to the consumers of power, wheat, sugar, rice and other products.

No power subsidy will be paid for agricultural tube wells in three provinces – Sindh, Punjab and Khyber-Pakhtunkhwa – next year. This year, however, the government has given Rs870 million to agricultural tube wells by bearing a burden of 12.5%.

In Balochistan, agricultural tube wells will continue to get power subsidy and Rs3 billion has been earmarked for next year, lower by Rs1 billion than the current year.



According to budget documents, a humongous amount of Rs165.1 billion has been allocated for subsidising the power sector. Of this, Rs150 billion will go for tariff differential claims of power distribution companies, Rs12 billion will be used to pick up receivables of Federally Administered Tribal Areas (Fata), Rs100 million will cover exchange rate differential for the US Agency for International Development’s (USAID) grant to power generation companies and Rs3 billion will cover tariff differential for agricultural tube wells in Balochistan.

Separately, consumers of Karachi Electric Supply Company will receive a subsidy of Rs55 billion.

In the outgoing year, the government earmarked Rs134.97 billion for the power sector, but subsidies could not be restricted and the amount swelled to Rs264.97 billion. To bridge the gap between the cost of power generation and the rate at which consumers were billed, Rs120 billion had been earmarked, but the figure went as high as Rs250 billion because of inefficiency and bad governance in power companies as well as unchecked electricity theft.

The subsidy also went higher after the previous government of Pakistan Peoples Party (PPP) froze power tariff for political gains in the current financial year.

KESC consumers were allocated a subsidy of Rs50.3 billion in the previous fiscal year, but it surged to Rs84.3 billion, according to revised estimates.

The Trading Corporation of Pakistan (TCP) has got nothing in the new budget for subsiding essential commodities. In 2012-13, the TCP was allocated Rs10 million to subsidise sugar.

The Utility Stores Corporation will receive Rs6 billion next year, same as in the current year. Of this, Rs2 billion will go for Ramazan package and Rs4 billion will be utilised to subsidise the sale of sugar to consumers.

The government has increased allocation for the Pakistan Agriculture Storage and Services Corporation (Passco) to Rs6 billion against Rs5.148 billion this year for wheat purchase and keeping reserves to stabilise prices.

Oil refineries and oil marketing companies will get a support of Rs4 billion and Fauji Fertilizer Bin Qasim will be provided Rs231 million. An amount of Rs283 million has been set aside for sale of wheat in Fata, Rs815 million for sale of wheat in Gilgit-Baltistan and Rs5 million for sale of salt in Gilgit-Baltistan.

reporting by zafar bhutta

Published in The Express Tribune, June 13^th, 2013.

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