ISLAMABAD: Finance Minister Dr Abdul Hafeez Shaikh has directed the concerned ministries to submit their subsidies phasing-out plans for implementation on a fast-track basis, well-informed sources told Business Recorder.
On December 16, 2020, the Finance Division noted that Prime Minister Imran Khan while reviewing a presentation by the "Think Tank" on July 18, 2020, created a "Subsidies Cell" in the Finance Division with the direction to carefully examine all types of subsidies - implicit or explicit, direct or indirect, budgeted or unbudgeted, recognized or unrecognized - with a view to assess their desirability and recommend rationalization wherever required.
Accordingly, the Cell was created and Dr Waqar Masood Khan, former Finance Secretary, was appointed as head of the subsidies cell. The Cell had undertaken an extensive exercise to point out the subsidies in a variety of economic activities and assessed their financial burden on the exchequer. This included power (electricity), gas, food, petroleum, fertilizer, grants-in-aid, loans, guarantees provided to and investments made in State Owned Enterprise (SOEs), treasury single-account, cash transfers, and National Savings. The assessment carried out by the Subsidies Cell had indicated that subsides amounted to around Rs 2.00 trillion annually, which constitute 4.5 percent of GDP and 58 percent of current budget (excluding interest payments).
On the other hand, it had been contended that there was an immense amount, of past investments, loans, guarantees, and uncovered borrowings which pose actual and potential loss to exchequer for lack of adequate returns or possible losses to be booked in not too distant a future. This stock was estimated by the Subsidies Cell at Rs 5.2 trillion as of 30th June 2020, which equals 24% of domestic debt.
The Prime Minister while reviewing the work of the subsidies cell had been consistently emphasizing the principle that subsidies were meant for the poor and therefore, should be targeted and restricted for only such people. All subsidies failing to meet this principle should be redirected for uses that would ameliorate the standard of living of the poor.
The Cell also examined the desirability and targeting of such subsidies and had made recommendations for rationalization based on an "Action Plan" together with timelines, potential savings and reduction of budgetary outlays. A phased approach had been proposed covering initially in Phase-I the subsidies provided to power (electricity) food and national savings.
Finance Division further stated that the Action Plan was presented to the Prime Minister on September 21, 2020. Finance Minister had advised that this plan may be brought before the ECC. The "Think Tank" in its meeting held on October 20, 2020 also adopted the plan. The recommendations of the Subsidies Cell together with Action Plan and potential savings, wherever identifiable were given in the proposal.
The ECC appreciated the efforts of the Ministry of Finance "Think Tank" and "Subsidies Cell" in the development of these proposals. The chair urged accelerated efforts towards implementation. While approving the proposal, the ECC directed that the relevant Ministries/Divisions in coordination with the "Subsidies Cell" submit fast-track implementation summaries.
Copyright Business Recorder, 2020