Budget 2021-22: Power sector secures lion’s share in Subsidy

June 13, 2021 (MLN): The federal government has allocated Rs682 billion in the federal budget for upcoming fiscal year in terms of subsidies, depicting an increase by 58% compared to the revised amount for FY21 and 3.2X higher than the budgeted figure for the ongoing year.

To note, the amount of Rs209bn was earmarked in terms of subsidy for the current FY21, which had surged to Rs430bn as per revised estimates in the budget.

According to the budget document, it is pretty clear that focus of government is relatively tilted towards power sector due to its lion’s share in subsidy (Rs596bn). The subsidy amount is 4 times higher than the allocated figure for FY21.

To recall, the allocated amount of subsidy to power sector for the ongoing fiscal year had been revised on the back of additional grant of Rs46bn to Power Holding Private Limited (PHPL). Moreover, Rs4bn increment was observed in subsidy for agricultural tube wells.

In addition, Rs26bn increment was witnessed for Water and Power Development Authority (Wapda) due to tariff differential and Rs5bn increased for Wapda receivables.

With respect to power distribution companies, government had to increase the amount of subsidy to Rs191.8 billion due to tariff differential.

All in all, Rs226bn have been added under the revised estimates in terms of subsidy to the power sector in the ongoing fiscal year.

Going by the budget document for the next fiscal year, out of the total allocated amount to power sector, the major chunk (Rs511bn) will go to Wapda/Pepco.

Out of 511bn, government has set aside Rs136bn for the Individual Power Producers (IPPs).

Subsequently, Rs118bn has allocated for PHPL whereas Rs4.4bn will be given to the agriculture tube wells located in Baluchistan. Furthermore, Rs7.6bn and Rs18bn have set aside for Wapda receivables in ex-FATA and receivables in merged districts of K-P, respectively. Meanwhile, Rs184bn has included for inter-DISCOs tariff differential.

Under Wapda/Pepco, Rs15bn will be given in terms under industrial support package and Rs26bn has allocated for Zero rated industry to boost industrialization.

Going by the statistics, K-Electric seems to be majorly focused area for the incumbent government as overall subsidy reached Rs85bn in FY22, 5X higher than the budgeted figure for the ongoing year. To note, the subsidy to K-Electric for the current fiscal year had revised by 6bn.

Out of Rs85bn, Rs56bn has allocated for tariff differential, Rs22bn earmarked for industrial support package and Rs7bn has put aside for tariff differential for agriculture tube wells in Balochistan.

On the petroleum side, government has allocated Rs20bn, up by 50% as compared to the allocated amount for the same sector in the ongoing FY21. However, the amount of subsidy had increased by 2bn under the revised estimates during the current fiscal year.

Under the head of petroleum, Rs10bn has earmarked for the provision of liquefied natural gas (LNG) on lower rates to the industry while Rs10bn will be used to pay liabilities of PSO and APL.

Likewise power and petroleum sector, the statistics reflect that government is also focused towards the betterment of the general public. Rs53bn has been set aside for the essential goods, up by 7% than the allocated amount and 44.6% than the revised estimates of the current fiscal year.

In order to provide low cost housing units for the low income households, the major chunk (Rs30bn) will be delivered to Naya Pakistan Housing Authority. For the purpose to incentivize public transport, Rs1bn has been allocated for Metro bus.

To support and promote storage facilities pertaining to agriculture sector, government has earmarked Rs7bn for Pakistan Agricultural Storage and Services Corporation (PASSCO). Out of which, Rs2bn has set aside on account of wheat operations and Rs5bn will be used for reserving wheat stock.

In terms of Ramzan Packages, Utility Stores Corporation (USC) has been allocated Rs6bn in FY22 which is 25% lower than the revised estimates of Rs8 billion in FY21. 

For the upcoming fiscal year, it is pertinent to mention that no significant allocation has been made in terms of subsidy for agriculture sector. On the contrary, the same sector received Rs9.5bn for fiscal package, Rs4 billion for agricultural loans, Rs1.5bn for Rabi crops and Rs615mn for pesticides during the current year.

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Posted on: 2021-06-13T01:24:00+05:00