ISLAMABAD, June 5: The government will provide in the 2006-07 federal budget about Rs109 billion or 1.2 per cent of GDP as subsidies and relief, which is about 31.3 per cent higher than the current year’s revised estimate of Rs83 billion.

Under the relief and subsidy package, the government will divert petroleum development levy collected on petroleum products to subsidy instead of using it as revenue income.

The highest Rs59 billion subsidy will go to the power sector, including Rs13.6 billion to the now-privatised Karachi Electricity Supply Company, to absorb the difference in tariff. Similarly, Rs21 billion will go to Wapda as subsidy for tubewells in Balochistan and GST subsidy.

An amount of Rs10 billion has been allocated for relief in pensions and salaries for the next year against the current year’s Rs15 billion, showing a reduction of about 33 per cent.

The subsidy for fertilisers has been increased by about 86 per cent to Rs13 billion for the next year compared with Rs7 billion in the current year.

The subsidy for food items — sugar, wheat and pulses — has been put at Rs12 billion for the next year, up by about 200 per cent over the current year’s Rs4 billion.

An amount of Rs10 billion has been allocated for fuel subsidy to partially offset the impact of international oil prices. It will be paid to oil companies and refineries as differential.

The Trading Corporation of Pakistan will be provided with a Rs20 billion subsidy for the import of fertiliser, wheat and sugar and to meet the Rs670 million loss it suffered on account of cotton trade.

A specific subsidy of Rs12.3 billion will be provided for urea and other fertilisers for which the government has allowed duty and tax-free import of fertilisers.