ISLAMABAD, April 11: Overstretched power sector subsidies and overall fiscal constraints have forced the caretaker government to put on hold the implementation of a decision of the previous government which called for release of Rs16.4 billion to be used as subsidy on agricultural tubewells.

A senior government official told Dawn that the Ministry of Finance was unwilling to provide fresh subsidies to the agriculture sector during the current fiscal year because it was finding it difficult to meet an increasing demand of the power sector to put to operation its thermal power plants in order to bridge widening gap between electricity demand and generation.

The finance ministry has already provided more than Rs260bn to the power sector as tariff differential subsidy and the cost of furnace oil imports against a budgeted amount of Rs120bn. Under the Budget Strategy Paper approved by the previous government, the power sector’s subsidy requirement had been revised to Rs291bn.

In view of increasing gap between the demand for electricity and its supply, which crossed 5000MW earlier this week, and closure of over 15 units, Prime Minister Mir Hazar Khan Khoso had on Tuesday approved disbursement of Rs20bn to enable fuel suppliers to augment furnace oil imports that would increase total budgetary injection into the power sector to Rs280bn.

“We are finding it extremely difficult to manage power sector’s fuel requirements within the revised ceiling of Rs291bn,” a senior finance ministry official said. “Our priority is to keep as many power plants running as possible within the available resources to manage public suffering in coming summer.

“[But] that does not mean we are not implementing the [previous] cabinet’s decision,” said the official in response to a question.

“The cabinet approval [for agricultural subsidy] is there but the same cabinet meeting had also put a ceiling of Rs291bn on power sector subsidies for the current year,” he said, adding that the question of fresh subsidy would be presented to the new government for proper budgetary allocation at the time of the announcement of next budget.

On the recommendations of a committee led by former minister Manzoor Wattoo and comprising Naveed Qamar, Khurshid Shah and Qamar Zaman Kaira, the Ministry of Water and Power had proposed that Rs16.4bn worth of subsidy be provided at a flat rate of Rs8 per unit from the existing rate of Rs11 per unit. The cabinet meeting presided over by then prime minister Raja Pervez Ashraf had approved the summary on March 7.

A power ministry official said the ministry was unaware of any progress on the agricultural subsidy. “The matter is pending before the Finance Division for notification,” he said. “They do not have the money to meet international obligations of the Pakistan State Oil and we have been getting less than 14,000 tonnes of furnace oil against a requirement of 28,000 tonnes,” he said.

Another official said the approval of agricultural subsidy was originally proposed at Rs42bn but was strongly opposed by the finance ministry and, hence, it was brought down to Rs16.4bn.

“It was just a political gimmick of the previous government to announce a major financial package to please rural voters a few days ahead of completing its tenure, but this is not going to be implemented before next budget and that too at the discretion of the next political government,” he said.

Had the PPP government been serious about extending subsidy to tubewells, it should have referred the matter to the Council of Common Interests because it was an issue of inter-provincial nature, said the official. “They were more interesting in playing to the gallery,” he added.