Concessions in the proposed budget

Though the budget debate this year has been largely overshadowed by the military operation in North Waziristan and political heat in the country including the Lahore killings on 17th June, 2014, Finance Minister Ishaq Dar made it a point to accommodate certain demands of the affected groups and make the budget more relevant to the evolving situation. Winding up the debate on the federal budget for FY15, he offered some major and minor concessions, including a Rs 14 billion subsidy on phosphate fertilisers to be shared equally by the federal and provincial governments. The subsidy, according to Ishaq Dar, would mean a reduction of Rs 400 per bag in the price of phosphate fertilizer and potash. Another important concession was the reduction in the proposed rate of Gas Infrastructure Development Cess (GIDC) for power sector from Rs 300 to Rs 100 per MMBTU, captive power plants from Rs 300 to Rs 200 and for general industry from Rs 300 to Rs 150 per MMBTU. GIDC on cement and commercial sectors was reduced to zero. Sales tax on the import of tractors, which was proposed to be increased to 16 percent, was to remain at its previous rate of 10 percent. An incentive package to promote industry in Fata was also to remain effective for five years until June, 2019 while a package to allow duty-free import of machinery for fruit processing was to be applicable to Gilgit-Baltistan, Balochistan and Malakand Division of KP. Sales tax on the import of edible oilseeds was reduced to 16 percent from the proposed 17 percent. Uniform income tax rate of 4 percent for first class international air tickets was announced for both filers and non-filers of returns instead of the proposed 3 and 6 percent respectively. Incoming international calls by overseas Pakistanis were exempted from a levy imposed under the International Clearing House policy in force since October, 2012 in a move to eliminate grey traffic.
Some of the announcements made by the Finance Minister were, however, non-specific and somewhat vague in nature probably due to the complexity of the situation. He assured the house that government would provide all the resources to carry out the newly-launched anti-terrorist military operation in North Waziristan and take care of the people to be displaced by the campaign. Needs of the armed forces could be met through supplementary demands for grants while an initial amount of Rs 500 million was sanctioned to help IDPs from NW. The house was also told that the finance ministry had fully or partially accepted 57 of the 133 non-binding recommendations of the Senate while decisions on 49 others would be taken after a "due process" of required consultation with other concerned departments and provincial governments. Responding to some of the criticism from the opposition, Finance Minister asserted that credit to the private sector had gone up, exports had expanded by 3.72 percent and home remittances had surged by 12.39 percent during the year.
Although, following a comprehensive debate in the National Assembly, Finance Minister of the country usually makes certain changes in the proposed budget before it is finally approved, yet the opposition parties seem to have singularly failed this time to make a convincing case for proper adjustments or limit their arguments only to generalities without making the necessary preparation. It seems that both the government and opposition parties were preoccupied more with other urgent matters in the country rather than attending to the mundane business of budget-making, which was rather disappointing. However, the amendments finally made in the budget could only be called a mixed bag. It was good to see that the Finance Minister has accorded due respect to the Senate this time by accommodating a part of their recommendations. This could satisfy the provinces to a large extent and promote harmony between various units of the federation. Higher allocations for defence and resettlement of IDPs was almost a foregone conclusion due to the ongoing armed conflict in North Waziristan and uncertainty about its duration. The subsidy on phosphate fertilisers and reduction in the sales tax on tractors was yet another effort to please the lobby of agriculturists which, is not at all in a mood to contribute to the government exchequer despite a substantial rise in the prices of agricultural products in the recent past. This is highly inequitable and would increase frustration in the urban areas. A package allowing duty-free import of machinery for processing and preservation of fruits in certain areas of the country is not understandable because the same machinery could easily be transferred to other areas for actual use to deprive the government of due taxes. The differentiation between filers and non-filers of returns for purchase of first class tickets has been done away with. The measure was introduced to encourage the non-filers to file their returns and broaden the tax net but the amendment would obviously defeat the objective, for which it was proposed. Finance Minister also continues to take the credit for surge in remittances and some expansion in exports without realising that the government has taken no concrete steps during the course of the year for this achievement. The increase in these aggregates is largely the result of a continuation of the previous trend. Finally, it is obvious that the amendments made by the Finance Minister are various kinds of concessions, which could only increase the overall budget deficit and indebtedness of the country. In a warlike situation, such a policy was not appropriate. It would have been better to tighten the belt further and release more resources for defence to meet the growing security challenge confronted by the country.