Pak govt to allocate Rs 250 bn in subsidies

Islamabad: The government is likely to allocate around Rs 250 billion in subsidies to electricity and oil consumers in the upcoming 2008-09 budget, sources told Daily Times on Monday. Sources in the Petroleum Ministry said that the government had decided on the subsidy after considering the available financial resources. However, they added that the government still owed billions of rupees to the power and oil sectors and as such it would be difficult for the government to arrange such a large sum.

Target: The government has targeted Rs 80 billion - Rs 100 billion subsidy for electricity consumers in the upcoming 2008-09 budget and a further Rs 150 billion for the oil sector to facilitate the consumers, they added.

The sources said that following the current hike in oil prices, the subsidy in the power sector would increase by Rs 130 - Rs 140 billion during the forthcoming fiscal year.

Increase: They said that Power Distribution Companies (DISCOs) have filed a petition with the National Electric Power Regulatory Authority seeking an increase of 35 percent in the power tariff due to the hike in oil prices. The increase sought by the DISCOs would be implemented by July 1, 2008, they added.

In the 2007-08 budget, the government had notified a 10 percent increase in the power tariff. The government is expected to pass on a similar increase this year, while bearing the remaining amount in the form of subsidy.

The Petroleum Ministry sources said that the government had paid Rs 150 billion price differential claims to Oil Marketing Companies (OMCs), adding that pending claims would likely increase to Rs 100 billion by June 15. They claimed that the government was attempting to reduce the margin of OMCs and general sales tax on petroleum products to stabilise oil prices.

The sources said that the government was also considering another option to reduce the burden of subsidy on the exchequer by abolishing the subsidy on diesel products by the end of 2008. They said that the government could also maintain a reasonable subsidy on petrol and diesel by reducing the subsidy on petrol and kerosene oil.