Despite pressure from the International Monetary Fund (IMF), the government of Pakistan has proposed a substantial amount of subsidies totaling Rs 1.074 trillion for various sectors in the upcoming fiscal year 2023-24.
While this amount reflects a decrease of 2.6 percent compared to the revised Rs 1.13 trillion subsidies allocated in the previous fiscal year, 2022-23, the fund will be less than happy at the continued high expenditure on subsidies.
The multiparty government initially reduced subsidies by approximately 54 percent to Rs 664 billion in the budget for 2022-23. However, it later increased the subsidy to Rs 1.1 trillion during the outgoing financial year, deviating from the initial cut in an apparent attempt to balance the needs of the country with the demands of the IMF.
Here is a breakdown of the proposed subsidies in different sectors:
In the power sector, subsidies have been reduced to Rs 579 billion for the fiscal year 2023-24 from the revised Rs 677 billion allocated in the budget for 2022-23. However, this subsidy still reflects a significant increase of 21.4 percent compared to the initial figure of Rs 455 billion set for 2022-23.
For Inter-Discos tariff differential, an amount of Rs 150 billion has been allocated in the budget for 2023-24, which is lower than the Rs 225 billion allocated for the fiscal year 2022-23.
Independent Power Producers (IPPs)
The government has earmarked Rs 310 billion for payment to Independent Power Producers (IPPs) in the fiscal year 2023-24, an increase from the Rs 180 billion allocated in the outgoing fiscal year. Notably, no specific amount has been set aside for FCA Spillover, Kissan Package, flood water management, industrial support package, and zero-rated industrial subsidy.
For AJ&K TDS (Tariff Differential Surcharge), the government has allocated Rs 55 billion for the fiscal year 2023-24.
The government has allocated Rs 315 billion for K-Electric in the fiscal year 2023-24, marking a 38 percent increase compared to the revised Rs 193 billion allocated in the previous fiscal year. Of this amount, Rs 127 billion is allocated for TDS, Rs 10 billion for the tariff differential for agriculture tube wells in Balochistan, and Rs 7 billion for ISP (Industrial Support Package).
The government has allocated Rs 53.6 billion as a subsidy for petroleum in the fiscal year 2023-24, indicating a reduction of 47.4 percent from the revised allocation of Rs 102 billion in 2022-23. Within this allocation, Rs 12.6 billion has been set aside for Pakistan State Oil (PSO) and APL abilities, Rs 30 billion for domestic consumers through Sui Northern Gas Pipelines Limited (SNGPL), while no amount has been allocated for the LNG sector to provide lower gas to the industry and PDC (Petroleum Development Corporation) claims.
For the Pakistan Agricultural Storage and Services Corporation (Passco), Rs 10 billion has been allocated as a subsidy for wheat operations and wheat reserve stocks.
Utility Stores Corporation (USC)
The government has allocated Rs 35 billion for the Utility Stores Corporation (USC) in the fiscal year 2023-24, representing a 14 percent increase from the revised allocation of Rs 30 billion in 2022-23. Of this amount, Rs 5 billion will be dedicated to the Ramazan package, while Rs 30 billion will be allocated for the Prime Minister’s package.
Other Budgeted Subsidies
There are several other subsidies proposed in the budget for the fiscal year 2023-24. These include Rs 10.5 billion for wheat subsidy in Gilgit-Baltistan, Rs 2 billion for the Metro Bus project, Rs 12.2 billion for the Mera Pakistan Mera Ghar Housing Scheme, Rs 30 billion for fertilizer plants subsidy, and Rs 6 billion for the subsidy on the import of urea.