LAHORE: The Pakistan Tehreek-i-Insaf (PTI) government in Punjab presented its first budget for the present fiscal year on Tuesday that jacks up (provincial) current expenditure by almost a quarter to Rs1.3 billion from a year ago, slashes public investment by more than 62pc to Rs238bn, produces a significantly huge cash surplus of Rs147.8bn to meet a federal requirement to keep consolidated national deficit (at 5.1pc) and pledges creation of the promised South Punjab province along administrative lines.

Although the government has avoided imposing new taxes, it has “rationalised” certain taxes for generation of more revenues. The provincial finance bill 2018 has cut motor vehicle tax by 50pc to 80pc on imported cars between engine capacity of 1300cc and 2500cc to prevent car users from registering their vehicles in Islamabad or Sindh.

The bill also proposes up to five times increase in stamps duty on different agreements, which will generate almost Rs1bn for the government. It has also decided to bring premium insurance and courier services into the net of provincial sales tax on services to broaden the sales tax base and suggested changes in the Punjab Sales Tax on Services Act, 2012, for improving compliance of the law. The Punjab Revenue Authority has also been given new powers to seize and seal businesses that do not comply with the sales tax law requirements.

Token tax on imported luxury cars cut by 80pc; PRA can seal non-compliant businesses; insurance, courier services to go costlier

The budget with a total outlay of Rs2.2 trillion was presented by Punjab finance minister Makhdum Hashim Jawan Bakht amid loud cries by the opposition Pakistan Muslim League-Nawaz (PML-N) legislators for the release of their party president Shahbaz Sharif, who is in the custody of National Accountability Bureau (NAB) since Oct 5 because of his suspected involvement in an alleged public housing scheme fraud. The opposition tore off copies of budget speech and damaged the desks of senior assembly staff.

The Usman Buzdar government is expecting an income of Rs1.3bn from federal divisible pool as its share under the National Finance Commission award besides targeting Rs275.8bn in provincial taxes and Rs100bn in provincial own non-tax receipts, including straight transfers, federal grants and net hydel profits. The provincial tax target has been hiked by a fifth from last year’s original estimate of Rs230bn. In addition, the province will raise international debt of Rs84.1bn that will include foreign project assistance loans of Rs51.1bn from multilateral lenders and other international financial institutions and Rs33bn from China for the Lahore Orange Line Metro Train project.

The province estimates to receive a sum of Rs149.4bn from the sale of its wheat stocks and borrow Rs130bn from domestic banks for procurement of the next crop in April-May 2019. A sum of Rs111bn has been set aside to pay off commercial loans obtained last year for wheat procurement and Rs168.4bn for the purchase of new stocks.

The provincial income estimates for the present year appear to be on the higher side because of the expectation of disbursement of net hydel profit arrears of Rs31.2bn and Rs10bn to be accrued under this head during the current fiscal. Last year, Islamabad had transferred Rs17.5bn against Rs32.8bn estimated in the budget. Officials candidly admit that the federal government could delay transfer of net hydel profits. In such a scenario, the provincial government’s efforts to produce the required cash surplus unless current expenditure is cut to make up for the shortfall, will fail.

Major current expenditure include allocation of Rs520bn for pay and pension of government employees, Rs438bn for local governments and Rs305bn for service delivery – education, healthcare, law and order, clean drinking water, etc. A sum of Rs373bn has been allocated for education, Rs284bn for health sector, Rs20.5bn for water supply and drainage, Rs93bn for production sector, Rs19bn for irrigation, Rs68bn for roads and Rs35.5bn for transport.

In his speech, the minister described his government’s first budget as “corrective budget” that would lay the foundation for a new Pakistan. He said Punjab was facing a financial crisis because of the previous regime’s irresponsible fiscal policies, unrealistic development priorities and poor planning. He pointed out that the cost of Lahore Orange Line Metro Train scheme was estimated to go up from original price of Rs165bn to Rs250bn and total provincial debt had spiked to Rs1.1tr. He also accused the Shahbaz Sharif administration of spending meagre financial resources on “cosmetic mega schemes at the expense of education and health of the people of the province”.

The Makhdum said the PTI government would take every action to bridge regional disparities in the province and support small and medium industries and agriculture sector. He said the government planned to encourage involvement of private capital in development schemes through public-private partnership (PPP).

Makhdum Hashim Jawan Bakht said the PTI’s budget focused more on human development, improvement of social sector, better governance and revival of economic growth in line with the PTI’s 100-day reforms agenda.

He said the Punjab government planned to introduce a strong, vibrant local government system for involving people in decision-making process and development projects. He said the budget aimed at creating job opportunities for the unemployed, provide credit to poor peasants, empower women, protect labour rights, promising to cut unnecessary expenditure and ensure financial discipline to create space for future development.

Published in Dawn, October 17th, 2018