The federal government may have yet another year massively understated subsidies in 2014-15 budget while complying with the agreement with the International Monetary Fund (IMF). According to the budget documents, the government has earmarked Rs 156.1 billion as subsidy for Pakistan Electric Power Company (Pepco) for 2014-15 against 165.1 billion allocated in 2013-14 but increased to 245.1 billion in the revised estimates.
The government also issued Term Finance Certificates (TFCs) amounting to Rs 31 billion to pay Pakistan State Oil (PSO) which defaulted on its international obligations. The government paid Rs 230 billion in 2013-14 as inter-Disco tariff differential against budgeted Rs 150 billion. The same amount has been earmarked for next fiscal year which is Rs 80 billion less than the actual release.
One billion rupees has been allocated for tariff differential for agri-tubewells in Balochistan against Rs 3 billion budgeted and released for 2013-14. An amount of Rs 5 billion has been allocated to pick up Wapda/Pepco receivables from Fata for fiscal year 2014-14 against Rs 12 billion allocated for 2013-14. The government has also budgeted Rs 100 million to bridge exchange rate differential for USAID's grant to Gencos - the same amount as last year.
The government has allocated Rs 29 billion as subsidy to K-Electric (formal name KESC) for 2014-15 against revised allocation of Rs 64 billion and budgeted Rs 55 billion for 2013-14. The government budgeted: (i) Rs 317 million to pick up KESC's payable to PSO and PKGCL; (ii) Rs 6 billion for USC of which Rs 3 billion is earmarked for Ramazan package and (iii) Rs 4 billion for sale of sugar at USC outlets. This is inexplicable given that Ishaq Dar as chairman of the ECC recently decided not to provide subsidy on sugar; (iv) Rs 8 billion for Passco, of which Rs 4 billion will be spent on cost differential and Rs 4 billion for wheat reserved stocks; (v) Rs 2 billion for oil refineries;(vi) sale of wheat in FATA Rs 293 million; and (vii) sale of wheat in Gilgit Baltistan Rs 850 million and Rs 0.5 million on sale of salt in Gilgit-Baltistan. According to budget documents, total amount of allocated subsidy is Rs 203.248 billion for 2014-15 against budgeted allocation of Rs 240.434 billion and revised allocation of 323.020 billion for 2013-14.