The government has reduced the volume of subsidies by 27.5 percent, to Rs 295. 204 billion, in 2008-09, against the revised allocation of Rs 407.485 billion for the outgoing fiscal year.
In the 2007-08 budget estimates, the government had allocated Rs 114 billion, or 1.1 per cent of GDP, for subsidies, which shot up to Rs 407.485 billion, or 3.9 percent of GDP, due to import of wheat and freezing of POL prices and electricity tariff a view to giving the PML-Q an edge over its rivals in general elections.
However, in 2008-09 budget estimates, the share of subsidies has been reduced to 2.4 percent of GDP. The government has been paying Rs 37.5 billion per month, or Rs 1.25 billion per day, as subsidy on account of petroleum products.
According to budget documents, Trading Corporation of Pakistan (TCP) will get Rs 26.6 billion as subsidy on import of wheat and sugar, beside reimbursement of losses in cotton operation.
The Water and Power Development Authority (Wapda) would be given Rs 74.612 billion on account of GST, inter-Disco tariff differential, Wapda GoP share (12.5 percent) for agriculture tubewells and Wapda tubewells in Balochistan. In the 2007-08 budget, the government had estimated Rs 52.893 billion for this purpose, which was revised upward to Rs 113.658 billion.
Subsidy allocation for Karachi Electric Supply Corporation (KESC) has been reduced to Rs 13.8 billion for 2008-09, as compared to Rs 19.6 billion in 2007-08.
The government has also allocated Rs 2.7 billion for Utility Stores Corporation (USC) for ghee package, sale of pulses, flour and Ramazan Package, against the 2007-08 revised estimate of Rs 1.8 billion.
The budget document said that Rs 140 billion has been allocated to pay subsidies to the oil marketing companies (OMCs) in 2008-09 as compared to Rs 15 billion estimated in 2007-08.
However, allocation of Rs 140 billion is substantially less than revised allocation of Rs 175 billion for 2007-08. The government has also earmarked Rs 35 billion, against Rs 13.5 billion for the outgoing fiscal year, as subsidy on import of urea, DAP and phosphatic and pottasic fertilisers.