Finance Ministry has reportedly informed the Economic Co-ordination Committee (ECC) of the Cabinet that the electricity crisis in the country is posing a serious threat to the budget deficit's target and economic stability in the wake of massive subsides, loss to the GDP, employment and revenue.
Sources told Business Recorder that for the first time the issue of electricity shortage was taken up by the ECC with a briefing by Ministry of Finance on the impact of electricity shortage on the economy. Secretary Finance Abdul Wajid Rana reportedly informed the ECC that industrial sector was utilising about 30 percent of the installed capacity.
A copy of the presentation made to the ECC available with Business Recorder reveals that electricity shortage is causing two percent loss to the GDP and a revenue loss to the tune of Rs52 billion. Additionally, the impact of electricity shortage on employment was to the tune of 0.4 million jobs.
Finance Ministry also told the ECC that there was a steady rise in subsidy to the power sector during the last four years with a consequent negative impact on the deficit and the government has provided more than Rs1163 billion subsides.
Total power subsidy in 2008-09 was Rs109.8 billion and rose to Rs178.8 in the subsequent fiscal year of 2009-10. The next two years were worse with Rs334 billion subsidy to the power sector and Rs464 billion in 2011-12. Actual subsidy during each of the four years was considerably in excess of the budgeted subsidy.
An official said that Finance Ministry had already released more than Rs86 billion to the power sector as subsidy in the first three months of the current fiscal year and there seems to be no end to the increasing demand for subsidy. The total power sector subsidy budgeted for the year is Rs 134 billion which, given the current trend, would be more than doubled by the end of the year.
The ECC was informed that the reported wheat stocks as on October 1, 2012 were 8.5 million tons which are sufficient for the required daily release to mills by Provincial Food Departments and PASSCO. The total reported stock of sugar in the country as on September, 20 2012 was slightly over 2,249,037 metric tons, compared to 1,210,867 metric tons last year (5 October, 2011). The stock of various POL products averaged 35 days on September 28, 2012 compared to 22 days on September 28, 2011. The meeting was informed that the latest economic indicators depict mixed signs.
Production in the Large Scale Manufacturing (LSM) sector stood at 0.6 percent in July, 2012 as compared to 0.9 percent in the same period last year. The items which registered increase are Food Beverage & Tobacco, Iron and Steel Products, Automobiles, Non Metallic Mineral Products, Chemicals and Rubber Products. The items which registered decrease are fertilisers, electronics, textile, coke and petroleum products, wood products, engineering products, leather products, paper and board and pharmaceuticals. Export growth declined by 4.6 percent while imports also decreased by 4.6 percent thus trade deficit on year on year basis registered US $2.4 billion during July-August, 2012-13. The ECC was informed that worker remittances reached $2.464 million in July-August 2012-13 as against $2.407 million in the comparable period of 2011-12, showing an increase of 2.4 percent. Saudi Arabia, UAE and UK are the largest source of worker remittances. Gross Foreign Exchange Reserves (including FCA deposits with scheduled banks) stood at US $14.9 billion as on September 28, 2012.
The meeting was also informed that for the fiscal year 2012-13 (July - August), FBR provisional tax collection stood at Rs 230 billion as compared to Rs 233 billion in the same period last year, thereby posting a decrease of 1 percent. Inflow of Foreign Direct Investment (FDI) for July- August (2012-13) stood at $174 million.
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