Urea subsidy, BISP: Federal govt trying to wean itself away

ISLAMABAD: Finance Ministry, which is actively engaged with the provinces under the umbrella of Special Investment Council (SIFC) on different issues, is set to get rid of urea subsidy and Benazir Income Support Fund (BISP), as policy matters can be addressed by the caretaker administration subject to concurrence/ approval from the Election Commission of Pakistan (ECP), sources close to Secretary Finance told Business Recorder.

Secretary Finance ImdadUllah Bosal at a recent meeting with provincial Secretaries of Finance stated in plain words that since both these subjects are devolved to provinces, they are now their responsibility.

On urea subsidy, Federal Secretary, Industries & Production briefed the participants that the country’s minimum annual requirement of urea was 200,000 Mts, which costs around US$ 82 million.

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He stated that Federal Government was not in a position to offer subsidy on urea, adding that since agriculture was a provincial subject; therefore, the subsidy bill must be borne 100% by provinces.

He further informed the participants that there was an urgent requirement for placing of order for import of urea for the next season. Provinces needed to intimate their requirement of urea and pay the subsidy. The matter had been taken up with provinces many times before but they remained indecisive.

Secretary Finance Sindh Kazim Hussain Jatoi stated that a summary with the proposal for sharing 100% subsidy on urea during CFY and 50% for previous FY has been initiated and submitted to Chief Minister Sindh by the agriculture department. However, he pointed out that Sindh was not consulted regarding import requirement of urea during last year.

Special Secretary Finance Khyber Pakhtunkhwa Muhammad Asif Rasheed proposed that the provincial government may be consulted regarding its urea import requirement.

Secretary Industries and Production clarified that after a number of consultative sessions, agriculture departments of the provinces have placed orders with the Ministry of National Food Security and Research. Federal Government will import urea as per minimum requirement of the provinces. He further clarified that Federal Government was not in a position to offer subsidy on domestic urea as production of local urea was also being shifted to RLNG due to shortage of gas.

Federal Finance Secretary stated that as the sowing season is going to commence, the provincial agriculture departments may be taken on board quickly as Ministry of Industries has to arrange urea through Government-to-Government or through tender shortly.

Finance Secretary Punjab Mujahid Sherdil stated that he will request Secretary Agriculture to move a summary for decision of the cabinet, although the cabinet was not really responsive on a similar summary moved previously.

About the Benazir Income Support Programme (BISP), Federal Finance Secretary recalled that during the meeting of Federal Finance Minister with the Provincial Finance Ministers, it was discussed that since Social Protection is a provincial subject; therefore, the provinces may share the expenditure on BISP.

He explained that there were two types of schemes under BISP, i.e., Conditional Cash Transfers and Non-Conditional Cash Transfers. Conditional cash transfers were made in Health and Education Sectors, which were provincial subjects. He requested Secretary, Poverty Alleviation and Social Safety (PA&SS) Division to give a briefing on the proposals.

Secretary PA&SS Division shared following proposals: (i) Conditional Cash Transfers (CCT) encompass expenditures related to health and education, representing 18% of the BISP budget. As education and health predominantly fall under provincial jurisdiction, the provinces may assume full responsibility for CCTS. The Federal Government can collaborate by sharing access to the database, including the National Socioeconomic Registry and payment system, with the provinces; (ii) major bulk of the program consists of Non-Conditional Cash Transfer for which the Federal Government proposes provincial representation on the Board of BISP.

Provinces will be allowed to modify or tailor the design of the program as per their requirements. Further, as inflation indexation is updated every January, it will be a good start, if the provinces take over that as well from the next January; and (iii) provinces may share the Kafalat Program with Federal Government at the rate of 50:50 or corresponding to the amounts that go to beneficiaries of the respective provinces.

Finance Secretary Punjab Mujahid Sherdil emphasised that mere representation on the BISP Board would not be adequate. Further, he expressed Punjab government’s readiness to assume full responsibility for the social safety program and to independently make decisions about its design.

It was proposed that the Federal Government may share its database with the provincial government. Existing beneficiaries would be safeguarded, but the inclusion of new beneficiaries would fall under the province’s exclusive jurisdiction.

Finance Secretary Balochistan Babar Khan said that there were three programs regarding social safety being undertaken at present, i.e., Kafalat, Taleemi Wazaif and Nashonama. He requested that the Kafalat program may be continued by the Federal Government.

However, due to the province’s constrained financial situation, Balochistan would be unable to assume the financial burden associated with Taleemi Wazaif and Nashonama during the CFY. The Finance Secretary of Balochistan expressed concerns that the caretaker cabinet would not assume this responsibility, as it involved major policy decisions and would require legislation.

Therefore, he proposed that the transfer of these expenditures be deferred until the next elected government takes office.

Finance Secretary Sindh said that Government of Sindh had its own Conditional Cash Transfer schemes, as well, for the poor segments, particularly, in health sector.

He requested to have a detailed meeting with Federal Government on the matter; however, ultimate decision would be taken by the Chief Minister and the provincial cabinet. It was emphasised that since all the expenses have already been budgeted, and there is a surplus as committed to the Federal Government, these expenditures should be postponed until the next financial year.

Special Finance Secretary KP voiced similar concerns, stating that the KP Government would face difficulties in covering the expenses associated with BISP due to its challenging financial situation.

The Federal Finance Secretary underscored that both subjects were constitutionally delegated to the provinces. He mentioned that policy matters could be addressed by the caretaker administration subject to concurrence/ approval from the Election Commission of Pakistan.

Furthermore, he noted that certain amendments in the banking laws at the federal level were in progress as agreed under the IMF programme. These amendments would be presented to the caretaker cabinet for consideration. SIFC, headed by the Prime Minister, includes highest level representation from both the federal government and the provinces. It has been established to tackle the intricate issues of this nature.

The Secretary of the PA&SS Division Yusuf Khan clarified that database would not be shared with provinces. Nevertheless, the data is updated annually, and it can be accessed by anyone through an API.

He further stated that PA&SS Division had already shared two-way exchange of data protocols with the provinces and their response was awaited. “Stance of the provincial governments to defer the transfer of provincial nature expenditures for next financial year was not tenable as these decisions were required to be taken immediately. Asking for deferment would reflect that the provincial governments were not ready to take responsibility of their constitutional role,” Bosal added.

After threadbare discussion it was decided that Secretary M/o PA&SS and Secretary BISP along with Finance Division may sit with the Provincial Finance Secretaries and work out modalities regarding co-financing of Non-Conditional Cash Transfers by the provinces and handing over the Conditional Cash Transfers entirely, to the provinces.

Copyright Business Recorder, 2023