Wheat subsidy

It has been reported in a section of the press that the federal government and provinces have failed to agree on a formula to enhance wheat subsidy. It maybe recalled that Federal Finance Minister Ishaq Dar announced during his 3rd June budget speech that "from 1st July 2016, the government has decided that the price of urea is further reduced to Rs 1400 per bag. In this instance, just as in the past, the federal and provincial governments will pay the cost of subsidy which will be Rs 36 billion in equal shares... the government has decided that with effect from 1st July 2016, the price per bag of DAP will be Rs 2500. In this instance, just as in the past, the federal and provincial governments will pay the cost of subsidy which will be Rs 10 billion, in equal shares."
A well-informed official revealed that the Centre and two provinces - Sindh and Punjab - did not agree with the federal government's subsidy-sharing formula and added that the Centre has given more time to the provinces to reconsider their decision. This is yet another example of the extremely unfortunate trend where the Federal Ministry of Finance takes decisions that involve provinces without first taking them on board. The other recent example of such high-handedness on the part of the Centre was witnessed when the Centre designated the provincial governments as withholding agents; in the words of the Finance Minister during his budget speech "a large number of persons are filing sales tax returns with the provincial revenue authorities but are not filing income tax returns, it is proposed that such non-filers may be required to pay advance income tax monthly, to be collected by provincial revenue authorities along with sales tax returns, at the rate of 3 percent of turnover." Subsequently the onus of paying tax was put on the taxpayer and not on the province with the addition of the following provision: "Every provincial sales tax registered person; who is a non-filer (for income tax purposes); to pay 3% of the turnover declared before provincial revenue authority as monthly advance tax; at the time when the provincial sales tax return is due." This additional provision defies logic as why a non-filer who has not filed his/her income tax returns but has filed sales tax returns would because of this provision volunteer to file his income tax returns.
There are other instances where the federal government has opted not to get provincial input prior to announcing a policy measure that, subsequent to provincial opposition, required a withdrawal and/or amendment. The Council of Common Interests (CCI) is a forum provided by the constitution, requiring at least a meeting once in three months that could have been used by the Centre to get the provinces on board; however sadly this forum has rarely been used since the Sharif administration took over the reins of government more than three years ago. And with Punjab also not on board in several instances, where the PML-N has formed a government, the trend to bypass provinces in decisions which would have implications on their budgets is all the more inexplicable.
Reports indicate that the federal government's decision to extend support to the farm sector in budget 2016-17, which included the subsidy for fertiliser, was due to the insistence by the Punjab Chief Minister, Shahbaz Sharif, that the farm sector was suffering considerably from the Centre's economic policy measures and that unless and until some relief was provided the PML-N would lose support of this large sector in Punjab. Other federal budgetary measures in support of the farm sector focus on credit and its availability, which is a challenge to procure for the poor and subsistence farmers and include: (i) an enhancement in target of agriculture sector; (ii) a reduction in cost of credit by 2 percent may be insufficient inducement for poor and subsistence farmers to procure loans; (iii) a credit guarantee scheme through which the federal government would share the risk of non-payment of credit by small farmers by guaranteeing up to 50 percent of financing by participating financial institutions; and (iv) a concessional electricity tariff for tubewells that again are owned by middle income and rich farmers.