ISLAMABAD: The Senate Standing Committee on Finance and Revenue has opposed heavy increase in gas infrastructure development cess (GIDC) and a 50 per cent reduction in subsidy on electricity tariff, saying it will burden the people.

The committee led by Senator Nasrin Jalil of Muttahida Qaumi Movement also asked the government to consider further increase in salaries and pensions and provide subsidy on diesel to reduce input costs of businesses, transportation costs for commuters and goods and services.

The committee recommended that the government should develop a mechanism to keep lower petroleum levy for the poor and higher for the rich people after studying a similar model in Egypt for providing targeted subsidy on petroleum products to the poor.

Senate committee proposes further increase in salaries, pension and targeted subsidy on petroleum products

The members of the committee criticised the government for increasing the GIDC rates through the finance bill even though the GIDC was originally an act of parliament.

They said the government had illegally increased GIDC to Rs100 per mmBtu (million British thermal unit) from Rs13 per mmBtu and had now proposed to increase it from Rs450 to Rs996 per mmBtu through the next year budget.

Senator Ilyas Bilour of the Awami National Party said that the GIDC was originally introduced for development of natural gas infrastructure but alleged that it was being used for financing import of Liquefied Natural Gas (LNG) for Punjab where natural gas was really in short supply.

He said such a move was unfair and discriminatory with three other provinces.

Some members pointed out that the government had reduced power sector subsides from Rs309 billion during the current year to Rs185bn for next year as the government had given an undertaking to the International Monetary Fund to raise power tariffs during the current year.

They repeatedly asked as to when and how much the government planned to increase electricity tariff but were told that a decision had not been made yet.

The standing committee expressed its concern over meagre allocations for health and education sectors under the next year budget and desired that expenditures for these sectors should be increased.

The economic team led by Secretary Finance Dr Waqar Masood Khan kept insisting that the government had made allocations and expenditure estimates on the basis of available resources and hence the standing committee should also suggest how to arrange additional funds or cut expenditure in other areas to meet their budgetary proposals.

Dr Khan said the government did not have fiscal space for further increase in salaries and pensions after providing a relief of 10pc which was higher than the rate of inflation.

He said the responsibility of education and health sectors had devolved to the provinces and hence allocations for these areas should come from the provincial government.

Some senators suggested that the federal government had reduced capital gains tax on stock market securities to 12.5pc instead of already agreed 17pc. They proposed that instead of reducing this tax rate, the government should divert about 5pc difference between the two rates to education.

Secretary Planning and Development Hassan Nawaz Tarar, however, told the committee that under a recent interpretation of Article 25A of the Constitution by the Supreme Court “ the responsibility of providing basic education to all was on the state and resultantly on the federal government despite its devolution to the provinces.”

As a consequence, federal government had allocated Rs1.4bn for basic education project for elementary level and was meeting expenses of the National Commission on Human Development on the same principle.

The committee unanimously proposed to increase allocations for water sector projects saying the Rs42bn allocation in the next year budget for water sector did not commensurate with the challenges arising out of water and power shortages.

It also recommended reducing taxes on agricultural inputs but desired that revenue collection from agriculture should be improved to ensure this sector’s due share in the overall revenue base.

Some members also recommended to federalise the subject of tax on agriculture in any form but the government should not hide behind the argument that the issue was a provincial subject.

Published in Dawn, June 11th, 2014