Subsidies and confusions

Pakistan is supposedly moving towards a subsidy free regime - slowly (and gradually). At least, that is what we are made to believe by the economic managers. Yet, the 31 percent year-on-year increase in allocated amount for subsidies for FY12 hardly suggests that.
The glass-half-full side would like to compare it with the revised amount for FY11, which makes the FY12 subsidy allocation just one-third of previous year. But if that's the case, then wait till the actual numbers come out next year as subsidy overruns are considered quite a norm in Pakistan.
The much-talked about power sector has been allocated Rs 147 billion subsidy, which is 69 percent higher than the budgeted amount for FY11, despite the prior commitment to the IMF to eliminate the inter-disco tariff differential by August 2011. Half of the budgeted amount has been reserved for inter-disco tariff differential, to achieve which, the government will have to rationalise the power tariffs on monthly basis by at least 2 percent, something which it failed to do in FY11.
Another 38 percent of the budgeted amount has been reserved to pick up the interest on TFCs - but for that to happen, the circular debt will have to end sooner than later. There have not been enough steps taken in the direction of power sector reforms to suggest that the circular debt will be wiped out anytime soon. There are fears that just like the previous year, where the subsidy overran by Rs 256 billion, the slowness of reforms will result in a massive breach of target.
And if that happens, it will have a direct bearing on the PSDP account as the overruns in power sector subsidies have generally been traded-off with the PSDP budget. The PSDP target was slashed by Rs 201 billion and Rs 136 billion in FY11 and FY10 respectively. To provide substance to the notion of a trade-off between PSDP and power sector subsidies, Rs 256 billion and Rs 136 billion, were the amounts by which the power subsidy targets were missed.
Other than power subsidies, the budget document makes a classic case of confusion when it comes to subsidies on fertilisers. The chapter of 'subsidies & grants' in the budget document shows no allocation for subsidy on import of urea and other fertilisers, whereas, the revised amount for FY11 shows Rs 5 billion against zero budgeted allocation made in FY11 budget. Now, if that is to be believed, it will have a huge impact on urea prices in Pakistan, which also suggests a withdrawal of feedstock subsidy to fertiliser manufacturers to bring the local price at parity with international price.
But the story takes a complete U-turn if one flips a few pages over to the section titled "other development expenditures", where subsidy on urea imports shows an allocation of Rs 12 billion. At the same time, it reverses the budgeted and revised figures for FY11, implying that the government paid zero subsidy on urea imports in FY11.
Considering that urea imports had already reached 0.6 million tons during Jul-Apr FY11, there is no way one can believe that urea imports were not subsidised, as it would have had a great impact on local prices and feedstock subsidy would have also been abolished - but none of it actually happened, which only adds to the confusion.
What is also interesting is that besides duplicity and contrasting figures, fertiliser subsides have been placed under the head of 'other development expenditures'. Whether it is a ploy to understate the subsidies by including them in development expenditures or just an error is anybody's guess - but placing fertiliser subsides under development expenditure does defy logic. The question remains - is there subsidy on fertilisers or not? Whom to believe? The budget document has left one confused.