ISLAMABAD: The federal government has increased power sector subsidies by over 300 percent to Rs 510 billion for fiscal year 2021-22 as compared to Rs 124 billion allocated in budget for 2020-21, which was later revised upward to Rs 350 billon.
Of this, an amount of Rs 136 billion has been earmarked for the Independent Power Producers (IPPs).
The government recently paid Rs 89.2 billion to 20 IPPs as per revised agreements and increased allocations for Power Holding Private Limited (PHPL) by 152.6 per cent to Rs 118 billion against revised allocations of Rs 46 billion during 2020-21. Allocation for inter-Disco tariff differential has been enhanced by 67 per cent to Rs 184 billion for 2021-22 as compared to budget allocations of Rs 110 billion in 2020-21 and revised estimate of Rs 191.830 billion. This implies that inter-Disco tariff differential subsidy has been reduced by over 4 per cent vis-à-vis revised allocations.
Allocation for subsidy to Karachi Electric (KE) has been massively enhanced by 450 per cent to Rs 85 billion for 2021-22 as compared to budget allocation of Rs 15.5 in 2020-21 which was revised to Rs 16 billion.
KE will get a subsidy to Rs 56 billion as tariff differential in 2021-22 which is 460 per cent higher than budget allocation of Rs 10 billion in 2020-21 and 250 per cent higher than revised allocation of 2020-21. An amount of Rs 7 billion has been earmarked for KE's tariff differential for agriculture tubewells in Balochistan. KE will also get Rs 22 billion as industrial support package in 2021-22 which is higher by 340 per cent against Rs 5 billion of 2020-21. Tariff Differential Subsidy (TDS) for agri tub-wells in Balochistan has been increased to Rs 4.4 billion for 2021-22 against budget allocation of Rs 3 billion, which was later revised to Rs 7 billion. An amount of Rs 7.6 billion has been earmarked to pay to Wapda/ Pepco receivables of ex-FATA. However, no amount has been allocated to pay to Wapda on account of tariff differential for AJ&K, despite the fact that an amount of Rs 1 billion had been allocated for 2020-21 which was revised upward to Rs 27 billion. An amount of Rs 2 billion has been earmarked for tariff differential to AJK as compared to revised allocation of Rs 36.537 billion.
Allocation for payment of Discos receivables of merged districts of KP has been enhanced by 80 per cent to Rs 18 billion for 2021-22 against Rs 10 billion in budget estimates, which was later on revised to Rs 15 billion.
For Industrial Support Package (ISP) an amount of Rs 15 billion has been earmarked in budget of 2021-22 while Rs 26 billion has been allocated for zero rated industries subsidy.
According to budget documents, an amount of Rs 171 billion has been earmarked as subsidy for other sectors/ departments - Rs 10 billion has been earmarked as subsidy to LNG sector for providing gas at lower rates to industry, Rs 10 billion for PSO, APL liabilities, Rs 7 billion for Passco for wheat operation and wheat reserved stock and Rs 6 billion for USC Ramazan Package against Rs 3 billion budget estimates and revised allocation of Rs 8 billion.
Allocation for subsidy for others has been increased by 7 per cent to Rs 53 billion for 2021-22 as compared to budget estimates of Rs 49.5 billion in 2020-21 but it is 44.6 per cent less vis-à-vis Rs 36.650 billion of revised allocations. Of this, an amount of Rs 8 billion has been earmarked for wheat subsidy against Rs 6 billion of 2020-21. Allocation for Metro Bus Subsidy has been slashed by 100 per cent to Rs 1 billion from Rs 2 billion, whereas subsidy to fertilizer plants will remain at Rs 6 billion. An amount of Rs 5 billion has been allocated for provision of (unnamed) subsidy.
For Naya Pakistan Housing, an amount of Rs 30 billion has been allocated as subsidy for 2021-22 against the same allocation in budget 202-21. However, the government has so far released only Rs 500 million. An amount of Rs 3 billion has been estimated as mark-up for Naya Pakistan.
However, no amount has been allocated for white fly pesticide, Prime Minister's fiscal package, Prime Minister's package for Rabi crops and agri loans by ZTBL to farmers. In 2020-21, the government had not earmarked any amount either for these items but paid Rs 15.2 billion as revised allocations.
In a nutshell, overall subsidy allocations have been increased by over 225 per cent to Rs 682 billion for 2021-22 against budget allocations of Rs 209 billion in 2020-21 and 59 per cent as compared to revised allocation of Rs 430 billion.
According to Finance Minister, subsidies are projected at Rs 682 billion up from Rs 430 billion of revised estimates, mostly comprising payments of due of IPPs, tariff differential subsidies and subsidies for food.
Copyright Business Recorder, 2021