The World Bank wants Pakistan to do away with its varied subsidies. Islamabad agrees to that in principle but would like to phase out the subsidies to the barest minimum over a longer period than the foreign donors would like.

In a country with persisting high inflation, it is not easy to do away with the subsidies, when poverty is rising particularly on the back of surging food and oil prices.With stagnant agriculture and inputs costs like fertiliser going up, farmers need to be encouraged either with subsidy items like on fertiliser to increase yield per acre. or by raising prices for their produce. Pakistan imported foodstuff worth nearly $4 billion besides four million bales of cotton during the last fiscal year. This level of imports is not sustainable.

The average farmer does not have equal access to water, power and costly fertilisers and expensive bank credit. It means low output per acre. Unless he gets a fair price for his crop, he cannot afford these inputs or invest on his lands to improve crop yield. Then the middle men who provide them loans and buy his crop are the major beneficiaries. And a lot of floating money in the market finding no productive outlet for investment is being used for hoarding and smuggling of food grains pushing up the prices of foodstuff. The government has come up with relief for the poor through the utility stores and cash payment to the poorest of the poor. Cash payments have been recommended by the World Bank experts. While incentives are needed for boosting agricultural output, it is equally important that serious efforts are made to tax farm incomes so that indirect taxes like sales tax, are reduced for the benefit on common consumers. If withholding tax is excluded from the direct taxes, their share drops to about 20 per cent of the tax revenue. While the national income is rising, the tax GDP-ratio remains stuck around 10 per cent of the GDP. The consumer pays high taxes, high prices for essential items and is now to be gradually denied subsidies. And the sales tax has been increased by one per cent.

There are variety of taxes on high oil on petroleum products which could be reduced at times of high prices for the benefit of the consumers. It has not be done.

Wheat is selling at a higher price in the market than the procurement prices announced this year. The supply chain needs to be improved to stabilise food prices. The cost of transportation is very high according to a World Bank study. The total loss from mismanaged transport is equal to $2 billion. The infrastructure needs to be improved through public-private partnership.

The picture is too confusing for the government to correct the new rates for CNG. It is still not clear whether the increase is Rs5.48 or Rs13 per kg. And because of such factors, the textile industry is always clamouring for relief and protection. And it is always a damsel in distress. There is subsidy on production and there is subsidy on exports. The private sector has yet to learnt to stand on its own feet.

So now to honour the commitment to the World Bank, the rate of power has been raised. And the gas rate has been raised by 31 per cent. There has been the fifth increase in POL in five months. All this is bound to push up prices sky high and cause deep distress among the poor. And it creates serious new problems, while solving none of the existing ones. And without stabilising prices, there is a move to withdraw subsidy.