May 25, 2008	Sunday	Jamadi-ul-Awwal 19, 1429

ISLAMABAD, May 24: Economic managers have proposed an increase of 60 to 80 per cent in subsidies in the coming budget to offset the impact of rising oil and food prices.

“The PPP-led government is planning to announce measures for reducing the burden of rising prices on poor people,” a source, who is involved in the preparation of the budget, told Dawn on Saturday.

It has been proposed to increase the amount of subsidies to over Rs200 billion from the current Rs111 billion on diesel, kerosene, fertiliser, electricity and food items to stabilise prices.

The source pointed out that owing to the double-digit inflation the actual subsidies for the current fiscal year would reach Rs260 billion by the end of June this year. Of these, subsidy on oil alone will reach Rs150 billion, electricity Rs70 billion and fertiliser and wheat Rs40 billion.

Independent economists, however, feared that such huge subsidies in the budget would result in reducing the cushions for the development budget.

A finance ministry source said that the subsidies might even cross the Rs200 billion figures because the government would need more money for not passing the actual increase in oil prices to consumers and for import of additional wheat. Currently, the subsidy on diesel has already reached Rs30 per litre from Rs17despite four upward revisions.

The source said that the previous government did not allocate sufficient amount of subsidies on oil, electricity and import of food items which forced the new government to make drastic cuts in the development budget of Rs520 billion for the current fiscal year.

Although the last government had enhanced the PSDP size from Rs96 billion to Rs520 billion over the past eights year, prices of food items and oil increased manifold sending millions of people below the poverty line.