The coalition government on Monday approved a Rs55.5 billion supplementary budget to pay for the cost of keeping the fuel prices unchanged during the past two weeks, bringing the total subsidy to a whopping Rs157 billion since former prime minister Imran Khan froze the prices.
Federal Minister for Finance Miftah Ismail chaired the Economic Coordination Committee (ECC) of the Cabinet and approved the subsidy in addition to allowing import of 200,000 metric tonnes of urea from China.
The ECC after deliberation approved supplementary grant of Rs55.48 billion for disbursement of Price Differential Claim (PDC) to Oil Marketing Companies (OMCs) and refineries for the first fortnight of May 2022, according to a statement issued by the Ministry of Finance.
Due to the continuously rising trend of oil prices in the international market, the quantum of subsidy has been on the higher side, it added.
With the fresh approval, the total amount that the taxpayers have so far paid to get fuel at lower than its cost stands at Rs157 billion. Of the Rs157 billion, Rs91 billion is the cost of indecisiveness by the government of Prime Minister Shehbaz Sharif. The Rs157 billion is exclusive of any adverse impact for keeping the prices unchanged for the remainder period of this month.
Shehbaz on Sunday rejected Finance Minister Miftah Ismail’s proposal to increase the prices, which were critical to make a good start in talks with the International Monetary Fund. The talks are scheduled to begin from Wednesday in Doha and the premier’s decision to play politics on national matter could cost the country dearly.
On Sunday, Miftah said that he would again talk to the IMF and find some middle path, hinting at a gradual price adjustment, adding that even though he had requested an increase in petroleum prices, “the prime minister did not agree to do it today”.
The global crude oil prices had jumped from $85 a barrel from the time when former PM Imran froze the prices on February 28 to over $108 now. By doing so, the previous government had not damaged the Pakistan Muslim League-Nawaz (PML-N) but played havoc with the national economy, Miftah said.
The subsidy in April was more than double the amount sanctioned for the month of March, indicating that the political gamble by Imran was not economically sustainable. This has further increased to nearly Rs56 billion for just 15 days –Rs3.7 billion a day.
The former prime minister had announced the relief package on petroleum products on February 28, 2022. The package included a reduction in the consumer price of petrol and high speed diesel (HSD) by Rs10 per litre and a commitment to keep the prices stable till the end of the fiscal year.
On Sunday, PM Shehbaz allowed the continuation of Rs47 per litre subsidy on petrol and Rs86 per litre on diesel for the second half of May. Oil prices have been increasing in the international market since September 2020, resulting in a substantial increase in the consumer prices of petroleum products in the country.
The last government had initially worked out the subsidy requirements at Rs246 billion for both the electricity (Rs136 billion) and fuel subsidies (Rs110 billion). However, the trend of the first two months of the subsidies showed that at the current rate, only the fuel subsidies would amount to over Rs300 billion.
Due to the provision of subsidised fuel and electricity, the federal budget deficit is expected to hit Rs5 trillion in this fiscal year – for the first time ever.
The Ministry of Industries and Production submitted a summary on import of urea and presented that the government intends to create better stock of urea fertiliser to ensure continuity of urea supply during the next financial year. It requested for allowing import of urea from the international market in order to stabilise the local market.
The ECC after discussion allowed the Trading Corporation of Pakistan (TCP) to explore the possibility of importing 200,000 MT of urea on government-to-government basis and on deferred payment, according to the finance ministry.