PTI government is considering to reduce Rs 400 billion subsidies

Government to withdraw subsidies to meet IMF condition

The PTI government is considering slashing the Generalised subsidies of Rs 400 billion annually. The government is considering different options to withdraw generalised subsidies and introduce targeted mechanism up to the extent of extreme poor. The PM Imran Khan has established a powerful cell to develop mechanism to end generalised subsidies and provide targeted subsidies where needed.  

 Almost 1 percent of GDP equivalent to Rs 430 billion is being provided in shape of recognised subsidies for different sectors with top most is meant for cash bleeding power sector. There are certain piling up liabilities such as commodity financing that is another form of circular debt and think tank established by PM Imran Khan identified that its circular debt was hovering close to Rs 800 billion.

If the government decided to withdraw the current level of subsidy on power tariff then the government will have to increase the price of electricity.  The rough estimates are suggesting that the government will have to jack up quarterly tariff by 15 to 20 percent.

The government plans to withdraw general power sector subsidies and will introduce targeted mechanism. The government is considering different options including withdrawal of generalized subsidy on 300 electricity units.

It is under consideration to bring down beneficiaries slab by 50 percent bringing it down from existing users of 300 units to 150 to 200 units under newly considered mechanism. The withdrawal of subsidies will increase collection of power sector and will help improving its fiscal woes under the IMF’s program conditions.

It is not surprising at all that IMF is pushing the government to reduce the subsidies to increase the revenues. Every IMF programme contains such conditionalities. The subsidies provided on power, gas, food etc to the poor people are considered non-productive under neoliberal ideology. Different governments in pakistan under the IMF programmes has so far slashed subsidies of billions of rupees. 

The IMF is forcing the developing countries to withdraw the subsidies since 1990s.

It is the government’s wish list to slash the power sector subsidy by Rs82 billion bringing it down from Rs211 billion in revised estimates of last fiscal year 2019-20 to Rs 129 billion for the current fiscal year 2020-21. The reduction in subsidy will hurt the lower middle class and better off working class people. 

There are two proposals under consideration one is to introduce new slab up to 150 units users for provision of targeted subsidy. Another proposal is bring down users for identification of beneficiaries from 300 to 200 units per month. Under the IMF programmes to secure the loans, every government was and still is forced to increase the prices of electricity. The power tariff has been increased many times in last few years. The PTI government once again considering to increase the tariff. The inflation will go further up as the result of power tariff increase. 

                                                                              Naila chaudhry