ISLAMABAD: With establishment of high-powered cell with approval of PM Imran Khan for slashing all kinds of subsidies touching whopping amount of Rs400 billion per annum, the government is considering different options to withdraw generalised subsidies and introduce targeted mechanism up to the extent of extreme poor.
Almost 1 percent of GDP equivalent to Rs430 billion is being provided in shape of recognised subsidies for different sectors with top most is meant for cash bleeding power sector. There are certain piling up liabilities such as commodity financing that is another form of circular debt and think tank established by PM Imran Khan identified that its circular debt was hovering close to Rs800 billion. A top official of Finance Ministry said that the highway for identification of poor through BISP data was available so the government is finding out ways to do away with generalized subsidies.
With abolishing of mechanism, the power tariff will go up and the rough estimates are suggesting that the government will have to jack up quarterly tariff by 15 to 20 percent.
The government plans to withdraw general power sector subsidies and will introduce targeted mechanism. The government is considering different options including withdrawal of generalized subsidy on 300 electricity units.
It is under consideration to bring down beneficiaries slab by 50 percent bringing it down from existing users of 300 units to 150 to 200 units under newly considered mechanism.
The withdrawal of subsidies will increase collection of power sector and will help improving its fiscal woes under the IMF’s program conditions.
It is the government’s wish list to slash the power sector subsidy by Rs82 billion bringing it down from Rs211 billion in revised estimates of last fiscal year 2019-20 to Rs129 billion for the current fiscal year 2020-21.
There are two proposals under consideration one is to introduce new slab up to 150 units users for provision of targeted subsidy. Another proposal is bring down users for identification of beneficiaries from 300 to 200 units per month. Under the IMF and World Bank loans, the curtailment of power sector subsidy is on cards.