Where is the argeted subsidy?

"We must save countrys finances by relieving it from the burden of un-targeted subsidies...We therefore plan to rationalise the present subsidies and discourage their indiscriminate use." This is what Ishaq Dar had to say in his budget speech. He also provided Rs2bn Ramazan Package to utility stores where anyone can go and buy.
Since the government is supposedly busy in formulating plans to combat the energy crisis, Dars statement raised hopes that the unpopular yet rationale decision of rationalizing the power tariffs will be taken. But then came the budget document and it proved enough to spoil the short-lived party.
The amount of subsidy budgeted for 2013-14 at Rs240 billion is nearly Rs32 billion more than what was budgeted in the previous budget. Of the subsidies allocated, 92 percent or Rs220 billion is budgeted for the power sector, of which Rs205 billion are allocated for inter-disco tariff differential.
One wonders if the government is really working to tackle the energy crisis, when tariff rationalisation has actually taken a backseat again. And if history is any guide, come June 2014, the revised subsidy for FY14 would end up on a considerably higher side. It is unfortunate that the government has missed the chance to take the bold decision in its honeymoon period and one which it promised in its election manifesto.
The government is hell bent on clearing the circular debt stock in 60 days, which will be nothing more than just a breather. Spending Rs500 billion on clearing the circular debt, without eradicating one of the root causes of the problem - i.e. the tariff differential - would end as a futile exercise. Without rationalizing power tariffs, the circular debt would surely mount again.
It is high time that the government understands that issuing TFCs and T-bills is not the solution. It is only a temporary relief, which had not worked in the past, and won work in the future, unless the root causes are addressed.
It appears that the government would raise the power tariffs in the name of tariff rationalization, but if Ishaq Dar is to be believed, it would not be anything more than a cosmetic measure. Dar, in a TV show last night hinted that the definition of lifeline consumers is a bit different in the Prime Ministers view.
At the moment, consumers using up to 100 units of electricity fall in this category. In Dars words, lifeline consumers are higher than the 100-unit category. So, it may not be long before a person paying an average bill of Rs2,000 a month falls in the lifeline category. So much for argeted subsidies.

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SUBSIDIES

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(Rs mn)       2011-12 B   2011-12 R   2012-13 B  2012-13R   2013-14 R

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Wapda/Pepco    122.700     419,018     134,970    264,970     165,100

KESC            24,588      45,238      50,317     84,317      55,000

TCP              4.000      18,252          10       -              -

USC              2,000       2,000       6,000      6,000       6,000

PASSCO           4.074      18,597       5.148      6,194       9.000

Others           9.086       9,087      12,150      5,991       5,334

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Total          166,448     512,292     208,595    367,472     240,434

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