The economic managers are determined to stay on-budget this fiscal – in line with a commitment made with the IMF.
Mohammad Ali
ISLAMABAD: The Ministry of Finance has had vetoed a Ministry of Commerce proposal to provide an additional, unbudgeted allocation to subsidise RLNG and electricity prices for export-oriented sectors in light of rising international energy prices.
The move has been justified based on budgetary constraints in light of Pakistan’s commitment with the International Monetary Fund (IMF) to stay on-budget in terms of subsidies.
The government has already earmarked PKR 40 billion for provision of RLNG at subsidised rates to five export oriented sectors. The Ministry of Commerce had requested an additional allocation if required during the current fiscal year as RLNG prices has gone up in international market.
The Economic Coordination Committee (ECC) of the Cabinet approved the summary forwarded by the Ministry of Commerce for the provision of electricity at a rate of USD 0.09/ Kwh for all exports oriented sectors.
The sectors benefiting from the concession – effective July 1, 2022 to June 30, 2023 – include jute, leather, carpet, and surgical and sports goods.
The ECC also approved a proposal for provision of RLNG to SSGCL consumers at the same concessionary tariff available to SNGPL consumers in five export oriented sectors. The rate of RLNG has been jacked up from USD 6.5 per MMBTU to USD 9 MMBTU.
Budgetary allocation to provide subsidised electricity and gas over the current fiscal year stands at PKR 20 billion and PKR 115.40 billion respectively. There government has a commitment with IMF to stay within the allocated budget.
The proposed rates of electricity at USD 0.09/kWh and of RLNG at US9 9/MMBTU have been arrived at in the context of the above referred budgetary allocation.
The Ministry of Finance replied categorically that in case of any additional funding requirements, the matter will have to be discussed with the IMF, in consultation with Ministry of Energy (Power and Petroleum Divisions), as and when required.
Meanwhile, Finance Division is of the view that as agreement with IMF hardly provides any additional space for subsequent incremental support.
The Ministry of Energy would therefore do well to keep an eye the implications for monthly subsidy needs vis-a-vis the budgeted amount, and make recommendations for readjustment of the subsidised rates on quarterly basis accordingly.
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