A green budget

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ISLAMABAD – Poor performance of the most vital economic sector of the country in the outgoing fiscal year served as a wakeup call for the finance planners as the new budget promises a big focuses on agriculture. The PML-N government on Thursday presented its fourth budget, first time in its bumpy political career, which promises development – though at the cost of heavier taxes. To keep the pace of growth shown by it in the outgoing year, the industrial sector also has been offered incentives for this financial year (2016-2017). The deficit budget with total outlay of Rs4.3 trillion also slashes some subsidies; however, salaries and pensions have been increase by 10 percent. Presenting the budget in the National Assembly, Finance Minister Ishaq Dar vowed to adopt measures to take GDP growth to 5.7 percent, generate employment opportunities and reduce poverty. The minister claimed that even their worst critics have acknowledged the stability in economy. “This is highly auspicious development for the country, as we are entering the fourth year of our tenure with poise, confidence and determination.” Ishaq Dar said his government would continue to reduce fiscal deficit – to Rs1.3 trillion (3.8 percent of the GDP) the beginning fiscal year – through a combination of better tax collection and tight expenditure control.

This year’s total expenditure has been estimated at Rs4.395 trillion, showing an increase of 7.3pc over current outgoing year’s revised estimates of Rs4.095 trillion. The allocations for defence increased from Rs776 billion in the previous year to Rs860 billion for this year, he said, showing an increase of 11pc.The Public Sector Development Programme (PSDP) has earmarked Rs800 billion against outgoing year’s revised estimate of Rs661 billion.

A major chunk of the budget of Rs1.4 trillion has been kept for interest payment, Rs240 billion for pensions, Rs140.6 billion for subsidies, Rs352.8 billion for running expenditure of civil government and Rs441.6 billion for grants and transfer.

Public relief

The government has announced 10 percent temporary relief on running basic pay of allemployees of the government and armed forces and merged two ad hoc allowances(10, 10 percent) of 2013 and 2014. Likewise, the pensions of civil and military officialsincreased by 10pc.  In special measures unveiled in the budget for the welfare of the labour class, theminimum wage rate has been increased from Rs13,000 to Rs14,000 per month.Increase in salaries, pension and minimum wage will have an additional impact of Rs57billon.

Massive taxation

The good things in budget come at a heavy cost. Price of stationery items and milk would increase, as the government proposed to withdraw zero-rating on these two sectors. It has also increased tax on cement, cigarettes, aerated water, poultry feed ingredients and marble industry. Sales tax rates on mobile phone sets has been proposed to increase from Rs500 and Rs1,000 to Rs1,000 and Rs1,500 for medium and high category mobile respectively.

Incentives for Agriculture

“It is day for agriculturists. Many incentives are being given to agriculturists,” Dar said, ostensibly responding to PTI’s lawmaker Shah Mehmood Qureshi, who was enquiring about incentives for agriculture sector. Announcing a package for this sector, which showed negative growth of 0.19 percent during outgoing financial year, the minister said government would reduce the urea price to Rs1,400 per bag from Rs1,800 per bag, which would cost Rs36 billion to the national kitty.

The price of DAP (Di-Ammonium Phosphate) would also decrease to Rs2,500 from Rs2,800 per bag costing Rs10 billion to the federal as well as provincial governments, he said. The sales tax on pesticides and its ingredients has been abolished. The government would also provide incentives to fish farming, cool chain machinery, dairy, and livestock and poultry sectors under the agricultural package, he said. The government has also decided to cut the power tariff for agriculture tube wells to Rs5.35 per unit from Rs8.85 per unit that would put financial burden of Rs27 billion to the national kitty. The government has also reduced the mark-up rates on cost of credit of ZTBL, NBP, Bank of Punjab and Punjab Co-operative by 2 percent.

Industrial Package

Ishaq Dar also unveiled an industrial package to promote industrial growth and employment generation. Tax credit at the rate 1pc of the tax payable for a period of ten years that is allowed for every 50 employees in an industrial undertaking to be set up by June 2018, is proposed to be increased to 2pc. While, period of exemption to investment in green field industrial undertakings announced under Prime Minister’s package of investment that is going to expire on June 30, 2017 is proposed to be extended up to June 30 2019. To further increase in GDP of industrial sector, existing customs duty of 5pc will be reduced to 3pc on 2,000 items, of mostly machinery, and raw materials which will benefit industrial sector to the tune of Rs18 billion.

Exports motivation:

Dar said that export of manufactured goods in Pakistan comes from five main sectors – textile, leather, sports goods, surgical goods and carpets, and these sectors would be zero-rated from July 1, 2016. Zero-rating facility will be available on purchase of raw materials, intermediate goods and the purchase of energy i.e. electricity, gas, furnace oil and coal. The retail sales of locally manufactured finished goods of these sectors will continue to be subjected to 5pc sales tax. Similarly, pending sales tax refunds till April 30 who’s RPOs have been approved will be paid by August 31, 2016, he added.

Powering Power Sector

The finance minister said that government is giving top priority to the power sector by allocating the largest amount of resources. Rs380 billion will be invested in this sector up from Rs287 billion allocated in last year’s budget. Of this, Rs130 billion will come from the PSDP this year as compared to Rs112 billion allocated last year. Dar also vowed to eliminate loadshedding by 2018 after adding 10,000 megawatt electricity in the national grid. The government has kept Rs61 billion for 969MW Neelum Jhelum Hydro Power Project, Rs16.5 billion for completion of 1410MW Tarbela-IV Extension Hydro Power Project and Rs60 billion for Two LNG power plants in Baloki and Haveli Bahadurshah, which will produce 2400MW of electricity.

It has allocated Rs32 billion for Diamir Bhasha Dam, which will store 4.7 MAF of water and generate 4,500MW electricity. Similarly, an amount of Rs42 billion has been earmarked for Dasu hydropower project, which will have the capacity to generate 2160MW in phase-1. About energy sector, Ishaq Dar said that import of solar panels and related components were exempted from customs duty regardless of local manufacturing subsidies till June 30, 2016.

Communication infrastructure:

He said that government has allocated Rs188 billion for construction of roads, highways and bridges, which is an increase of about 18pc as compared to last year. An amount of Rs78 billion has been kept for the Railways, including Rs41 billion for PSDP and Rs37 billion for pay and pensions.


The minister, without specially sharing proper economic plan for this mega project for next financial year, informed that $46b investment will be made under various schemesthat include building of roads etc. Dar, at the end of his speech, stressed the need for framing Charter of Economy to achieve sustainable growth. “I would once again request all political parties that they sit together to develop consensus.” The federal government, for the first time in parliamentary history, presented the federal budget in absence of prime minister, as PM Nawaz Sharif is in London for heart treatment.

With the onset of proceedings, Opposition Leader Syed Khursheed Shah took the floor asking the finance minister to share the matter of Panama leaks in his budgetary speech. “Country is facing menace of corruption, so there is need to highlight Panama controversy in budget speech,” said Shah. He also reminded the government that it was violating the constitution by not introducing NFC award. “Previous NFC award expired two years ago… federal government is violating rights of other provinces,” he said, despite the interruption from Speaker Ayaz Sadiq.

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