ISLAMABAD: The economic mangers have decided to cut down subsidies in the next budget on a majority of sectors in a bid to reduce budgetary constraints. However, subsidy to the power sector has been proposed to be raised.

An official of the finance ministry said it had been initially decided that the subsidy on electricity would be increased to Rs150 billion from around Rs147 billion of the current fiscal year.

He said there were pressures in view of the situation that the power subsidy was being raised. “But the government wants to keep this figure low and measures are being taken to gradually raise tariff and reduce the subsidy to the minimum.”

Most of the subsidies to the power sector are the differential between tariff and the cost of producing electricity – the same segment accounts for subsidy to the KESC, a private entity.

The other main head in terms of subsidy is interest payments on term finance certificates (TFCs) the government has floated to reduce the circular debt.During the current fiscal year, Rs55.70 billion was earmarked for interest payment on TFCs in the power sector and the amount is expected to be raised to around Rs57 billion, while subsidy for the differential between the cost of producing electricity and its tariff is expected to be increased by Rs1 billion next year.

However, it has been proposed that the government support for non-payment of electricity bills in Fata is likely to be reduced to around Rs6 billion from Rs7 billion in the current fiscal year.

The new budget may keep the subsidy for the food sector unchanged.

The food subsidy mainly given in terms of the Ramazan package will be Rs2 billion, whereas the subsidy for sugar will remain at Rs4 billion.

However, the country is less likely to face a sugar crisis like the one in 2011, but an official said the sugar subsidy could be used to offset the inflationary impact to be caused by the Ramazan package.

It has been proposed that Rs74 billion should be allocated for wheat operations by Passco. A subsidy of Rs4 billion will be allocated for Passco to maintain strategic wheat reserve stocks and around Rs1 billion subsidy has been proposed to provide wheat and other edible items to Fata and Gilgit-Baltistan at affordable prices.

The government support for fertilisers, including urea and DAP, has been proposed to be reduced by Rs6 billion to Rs20 billion.

“The conditions in the farm sector appear to be fair this year and the main issue will be the strategic stock to be built to protect urban consumers from hoarders,” the official said.

Sources said that various subsidies being given to the oil sector would be reduced to around Rs5 billion from about Rs8 billion of the current year.

Petroleum Minister Dr Asim Hussain told Dawn that he was against any subsidy for the petroleum sector by the federal government, adding that after the NFC award the provinces and federation had 70 and 30 per cent share in GST.

“The provinces should come forward to give more relief to the masses in the form of their share of subsidies,” he said.