Dar still claims there would
be no mini-budget
By Syed M. Aslam
July26 - August 1, 1999
Talking to journalists immediately after his Budget speech on June 12,
Finance Minister Ishaq Dar strongly denied that there would be any mini-budget. "I
would not allow any mini-budget and you know I never backed out of my commitments,"
The finance minister has certainly backed out of his commitments if
many post-budget developments are any indication. With in less than two weeks after the
presentation of Federal Budget, the government imposed a 95 per cent regulatory duty on
import of motorcycles in Completely Built-Up (CBU) condition to neutralize any impact of
reduction in duty from 105 per cent to 10 per cent.
Pakistan is heavily dependent on imported edible oil to meet its
domestic need. Taxing the edible oil import is seen by the government as a source to
generate extra revenues. In early March this year edible oil imports were subjected to a
regulatory duty of Rs 3000 per tonne. The imports were subjected to an additional
regulatory duty of Rs 2,000 per tonne in the Budget and very recently the government has
imposed a 15 per cent sales tax on the edible oil at the retail stage.
The finance minister announced a reduction of Central Excise Duty on
telephone from 25 per cent to 15 per cent in the Budget 1999-2000. However, the sole
fixed-telephone service provider, the state-owned Pakistan Telecommunications Corporation
(PTCL) found ways to neutralize the benefit by increasing both its monthly line rent and
tariffs for local calls. Instead of getting any benefit from reduction in the CED the
subscribers have now been made to pay an increased monthly bill.
The PTCL has increased the monthly line rent by a sharp 56 per cent
from Rs 144 to Rs 225 and call charges by 28 per cent from Rs 1.40 to Rs 1.79 per call. In
addition, all local calls are charged an extra call after every five minutes.
The government is considering to once again increase the price of
petroleum by at least 15 per cent in the near future. This will be a third price increase
since June last year when the petroleum prices were increased a record 25 per cent despite
decline in the petroleum prices in the international market. The ministry of petroleum and
natural resources again raised the prices of petroleum products by 10.5 per cent in May
this year. The price of regular and premium gasoline went up by Rs 2.21 and Rs 2.40 per
litre while that of the furnace oil went up from Rs 5,500 per tonne to Rs 6,070 per
As if increasing the price is not enough there are talks of selling
just one variety of motor fuel, the more expensive premium, from January next on the
pretext of checking the rampant adulteration. Observers feel that it is only an attempt to
force the people buy only the expensive variety to help generate windfall revenues.
The Shrinking Rupee
The promise of no mini-budget by the finance minister has turned out a
blatant lie to the discomfort of the middle-income segment of the society, particularly
those in the fixed income group on one hand and manufacturing and industrial activities on
Talking to PAGE, the chairman of SITE Industrial Association, Majyd
Aziz said that trends show that shopping frequency of the people has declined sharply
during last three years due to a drastic decrease in purchasing power and price increases
on account of high cost of production primarily because of high power tariff. People
dont even go for window-shopping so often as they used to do in the past, he added.
He said the consumers have to brave daily budgets as prices
keep on increasing everyday. This has forced the consumers to be more cautious to meet the
very basic needs such as rent and food and only than to think of buying any consumer item.
He claimed that even a 5-20 per cent decline in prices of many consumer items such as
fans, clothes, etc., during recent years has failed to bring consumers to the market.
He said that industries in Karachi are rendered extremely incompetitive
as compared to their counterparts in the province of Punjab where power rates are much
lower. For instance, he alleged, a 14,400 spindles textile spinning mill in Karachi pays
Rs 7.5 million more in electricity bill as compared to a similar unit in Punjab.
Similarly, the annual electricity bill of a 25,000 spindles spinning mill in Karachi
exceeds that of its counterpart in Punjab by an average Rs 10 million.
He said that on March 27 the Water and Power Development Authority
(WAPDA), the primary power generation and distribution agency for the country except
Karachi, reduced its tariff. During his visit to the Karachi Chamber of Commerce and
Industry, Prime Minister Nawaz Sharif asked the head of WAPDA to reduce the power tariff
in Karachi at par with the rest of the country. Majyd, who is one of the directors of
Karachi Electric Supply Corporation, said that the power tariff in Karachi is yet to be
The chairman of F.B. Area Industrial Zone, Farooq Bakaly said that any
increase in petroleum prices despite low international prices would render an already
incompetitive exports even more incompetitive in the international market while the
shrinking purchasing power would hurt the demand in the local market. He said that an
increase in petroleum prices not only increases price of everything but also the cost of
He said that if the increase in telephone charges and regulatory duty
and sales tax on such basic kitchen item as edible oil is not a mini-budget than what it
is. "What has happened to the commitment made by the finance minister?" he