Hundreds of uplift projects face the axe
- These also include non-starter projects
ISLAMABAD: The federal government has decided to scrape or shelve hundreds of development projects/schemes including non-starter projects and eliminate ion of subsidy on urea and BISP funding on the basis of 50:50 percent between centre and provinces, well-informed sources in Finance Ministry told Business Recorder.
To convey a clear message of federal government to provinces, Secretary Finance convened a meeting of Provincial Secretaries of Finance on Thursday (Oct 26).
Sharing details, sources said, provincial projects have made inroads into the federal PSDP at the cost of federal nature projects. Presently, 33% of financial resources are claimed by the provincial projects in the federal PSDP 2023-24 with allocation of Rs 314 billion.
Finance Ministry argues that due to resource constraints, funding is not being provided to the important national strategic projects which are facing cost overrun depriving the country of accrued benefits, adding that 18th Constitutional Amendment and 7th NFC Award made the provinces more autonomous and financially strong to undertake initiatives in the devolved subjects through respective ADPs.
Finance Ministry intends to share the following plan with the Provincial Finance Secretaries: (i) all 137 non-starter projects with zero financial progress including 7 PM initiatives may be dropped from the PSDP 2023-24 to save allocation of Rs 116 billion during CFY; (ii) no further release to SDGs Achievement Programme (SAP) to save balance allocation of Rs 29 billion; (iii) all 49 projects having financial progress from 0-20% may be considered for shifting to respective provinces for further financing through respective ADPs and postponed; (iv) 150 projects having financial progress between 21-80% may be critically reviewed by provinces and may be completed by the provinces through respective ADPs and/or bridge financing in case of cost sharing projects; (v) 20 projects with 80% plus progress may be completed during CFY on priority through re-appropriations/adjustment, if resources become available; and (vi) it was decided in a recent meeting of the Federal and Provincial Finance Ministers that PD&SI Division would hold individual consultative sessions with the provinces to provide the details of the above proposals to the provinces.
On Higher Education Commission (HEC), Finance Ministry argues that Federal Government continues to engage on devolved subjects e.g. HEC. The 18th Constitutional amendment initially had planned to devolve key functions of the HEC to the provinces. However, this was overturned by the Supreme Court’s decision which continues to be the legal basis of the HEC’s functioning until today.
Despite devolution of education to the provinces, HEC, a federally-funded entity with Rs.66 billion current grant and Rs.70 billion development grant has been disbursing a major share to the provinces.
Finance Division while issuing Indicative Budget Ceiling (IBC) for the FY 2023-24 categorically advised HEC to approach the provincial governments to meet the shortfalls of their universities.
In view of existing position, Finance Ministry has asked provincial governments to provide at least matching grants to the universities and ultimately take up the entire responsibility in due course of time.
On National Commission for Human Development (NCHD), Finance Division maintains that 6 August 2020 CCI decision 2020 on NCHD and Basic Education Community Schools (BECS) would be handed over to the respective provinces by 3oth June, 2021. The Ministry of Federal Education and Professional Training will work out modalities of handing over in consultation with the provinces, and devise a transition and integration plan within three months and present it to the CCI.
Finance Ministry further stated that Benazir Income Support Programme (BISP) is the largest social safety net program of Pakistan.
BISP’s operations are presently funded by the Federal Government. BISP’s budget allocation since its inception has been steadily increasing, and has doubled during last two Financial Years from Rs. 235 billion for FY 2021-22 to Rs. 471 billion for FY 2023-24 (BISP’s program/activity wise budgetary allocation for FY 2023-24. There is a growing risk that this level of spending may not be financially sustainable for the Federal Government.
In this regard, following two-step Action Plan is submitted for consideration: (i) as the first step, joint financing should be implemented for BISP’s two Conditional Cash Transfer (CCT) programs, BISP Taleemi Wazaif (children stipends) and BISP Nashonuma (Nutrition Program).
These Programs are related to Education and Health, which are Provincial subjects, and are being implemented in the Provinces through Provincial Government set-ups, ie, educational institutions and health facilities. Provincial Governments should contribute 50% of the agreed budgetary outlay towards BISP’s budget of these Programs.
These two Programs have a budgetary outlay of Rs. 87.69 billion for Current Fiscal Year. For subsequent years, BISP’s annual financial envelop as well as targeted number of beneficiaries for these two Programs may be agreed in consultation with Provincial Governments; (ii) at the next stage, joint financing should be implemented for BISP’s core Kafaalat Program (Unconditional Cash Transfers) which has a budgetary outlay of Rs. 361.5 billion for CFY.
BISP may continue beneficiary identification through NSER, beneficiaries’ payments and program administration. The province-wise number of BISP’s beneficiaries may be aligned with proportionate financial contribution of respective province. Provincial Governments may make any changes in the design of the program.
Finance Ministry maintains that the proposed co-financing arrangement would require active interaction amongst the Federal Government, BISP and respective Provincial Governments.
An institutional mechanism may be created for this purpose by giving representation to Provincial Governments’ representatives in the BISP Board.
The proposed arrangement would result in 50:50 co-financing by the Federal and four provincial governments for BISP’s three main beneficiary programs. However, the Federal Government may continue funding for UCT and CCT Programs in AJ&K, Gilgit-Baltistan and ICT, as well as BISPs NSER, program implementation and administrative costs.
As per proposal, once implemented, the provincial governments would contribute Rs. 216 billion out of total BISP budget of Rs. 471billion, ie, 46% of CFY budget of BISP.
The Federal Government has been providing subsidies to the fertilizer sector including subsidized supply of natural gas to fertilizer plants, subsidized supply of gas and RLNG to Agritech and Fatimafert (SNGPL-based plants) and subsidy on supply of imported urea.
The financial burden of subsidies has been borne by the Federal Government without any Provincial contribution. In the case of subsidy on imported urea, Provinces have in some cases agreed to provide 50% share of the subsidy. However, the payments due on account of the Provincial share have not been made in a timely manner. Currently an amount of Rs.25.6 billion is outstanding towards the Provinces.
On subsidy on fertilizer, Finance Division, Federal Government has been providing following types of subsidies to the fertilizer sector: (i) subsidized supply of natural gas to fertilizer plants; (ii) subsidized supply of gas & RLNG to Agritech and Fatimafert (SNGPL-based plants); and (iii) subsidy on supply of imported urea.
The financial burden of subsidies has been borne by the Federal Government without any Provincial contribution. In the case of subsidy on imported urea, Provinces have in some cases agreed to provide 50% share of the subsidy. However, the payments due on account of the Provincial share have not been made in a timely manner. Currently an amount of Rs.25.6 billion is outstanding towards the Provinces.
Finance Ministry argues that given the serious financial crunch faced by the Federal Government, it would not be possible to provide any subsidy for import of fertilizer or for its local production through the federal budget.
Finance Ministry, sources said, has also argued agriculture being a Provincial subject, provincial governments need to assume full responsibility for provision of subsidy, if any, on fertilizer import and production.
Finance Division further contends that Balochistan Government has not fully paid its share of Rs.45.6 billion of agriculture tubewell subsidy and consumers are also in default in excess of Rs.400 billion.
Finance Ministry has proposed that the Government of Balochistan may pay its outstanding share of subsidy under the agriculture tubewell subsidy and assist QESCO in recovery of consumer portion of bills.
At a recent meeting of the Federal and Provincial Finance Ministers the focus was on a roadmap on modalities to move forward and an estimate for yearly implication on provincial finances in case this proposal or a modified one was implemented be worked out in consultation with HEC, BISP and Finance Division.
Copyright Business Recorder, 2023
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