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," he said.

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 tonne.

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 the other.

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 don’t 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 reduced.

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 power.

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 asked.