ISLAMABAD: On an average consumption of 17.5 litres per month, the two options under consideration for petrol subsidy to a motorcycle owner are Rs 10,500 per year if the subsidy amount is Rs50 per litre and Rs 21,000 per year if the subsidy is Rs 100 per litre.
The total number of motorcycles on the roads is 29.5 million but only 60 percent or 17.7 million are operational. This implies that Rs 185.8 billion total subsidy would be required if it is at the rate of Rs 50 per litre and Rs 371.7 billion if the subsidy is at the rate of Rs 100 per litre. This amount, defined as unfunded subsidy, may be yet another impediment to the IMF’s 9th review success.
The annual consumption per motorcycle is 210 litres and consumption of motorcycles per year is 30 percent (3.72 billion litres) against total petrol market size per year of around 12.4 billion litres.
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State Minister for Energy (Petroleum Division) Musaddiq Malik at a press conference at Lahore on Monday said the government may increase the subsidized amount from Rs 50 to Rs 100 per litre. He further stated that the amount of cross subsidy would be generated by raising fuel prices for the rich, adding that the final proposal would be submitted before cabinet in six weeks. He said the petroleum relief will be given to low income consumers who have motorcycles, rickshaws, 800 cc cars and other small cars.
Sources further said that Rs 850 per month amount per motorcyclist is worked out in case of Rs 50 per litre subsidy which goes up to Rs1,750 per motorcyclist in case the subsidized amount is raised to Rs 100 per litre.
A proposal submitted to cabinet but not approved assumed an average salary of Rs 37,472 per month, with fuel expenses estimated as 7 to 15 percent of the salary. The fuel subsidy scheme for bikers will result in enhancement of disposable income for the lesser privileged population by almost 15 to 130 percent.
All assumptions are based on figures from Pakistan Bureau of Statistics (PBS) for fiscal year 2019, considered 1st to 4th quintile (80 percent of population) at a salary of Rs 31,707 per month. Last two years impact of inflation was also considered.
The real challenge would be to ensure that the subsidy is targeted to the poor and vulnerable and to identify the rich who would pay a higher rate to generate the cross subsidy.
Benazir Income Support Programme’s beneficiaries are only female – the only programme in the country that has identified the poor and vulnerable through National Socio Economic Registry (NSER) which is updated yearly. However, few BISP beneficiaries own motorcycles or any other mode of transport and hence for effective targeted subsidy on petrol, that would ensure that it is not misused by other than the target group, the government would have to include another column in the BISP application form that seeks to identify any other immediate family member who owns a motorcycle.
Under the proposed criteria, the beneficiary will be male within the ages of 30 to 35 year with average monthly income of Rs 37,472, a family size of five and social economic class C living in rented or shared space and blue collar workers - mechanics, plumbers, electricians etc, government employees of mid or lower level ranks and riders for ride hailing services/food delivery apps such as Bykea, Foodpanda etc are among the eligible.
Copyright Business Recorder, 2023