LAHORE: The Punjab government proposes to slash its subsidy bill by a hefty 60 per cent during next financial year through a massive reduction of Rs27 billion in its wheat price support to Rs1bn and a cut of Rs5.5bn in allocations for the Ramazan package to Rs2bn.

Overall, the Usman Buzdar government has set aside Rs21.6bn to provide food, transport and agriculture subsidies next fiscal year against the revised estimate of Rs53.3bn for the outgoing financial year, according to the budget documents. It is to be noted that originally the government had allocated Rs50.6bn for food, transport, Ramazan package and other subsidies this year. But the diversion of a substantial amount of Rs5.9bn in the middle of the year to support sugar manufacturers spiked its subsidy expense by 5.3pc. It has not made any allocation for sugar subsidy in the next year’s budget though.

Rs21.6bn set aside to provide food, transport and agri support against revised Rs53.3bn for outgoing year

The bulk of subsidy expense proposed for the next year or equal to almost 58pc of the total budgeted amount has been set aside for providing cheaper public transport, say the documents. Another Rs6bn – up by more than 70pc from the present fiscal year – will be used to support the farmers through agriculture. The estimates for the transport subsidy appear on the higher side as the government has revised down its expenditure on this count to Rs8.4bn from original allocation of Rs14.6bn during the current year.

The proposed reduction in wheat support price budget indicates the shift in the government policy to move towards a market-based [price] mechanism and let the private sector play a more active role in procurement of the crop during the next harvest with a view to reducing its expenditure and focusing on targeted subsidies.

Some finance officials, however, consider the reduced wheat subsidy allocations as unrealistic as it was more a political matter than financial management issue. “At the end of the year, the government is more likely to end up increasing the subsidy amount on wheat to avoid any political backlash,” one official said on condition of anonymity.

Published in Dawn, June 19th, 2019