RSS

Senate committee approves tax on bank transactions

Senate committee approves tax on bank transactions

A Senate committee backed on Tuesday the imposition of 0.6 per cent tax on all banking instruments of over Rs50,000 for non-filers of returns, while Finance Minister Ishaq Dar agreed to put in place a mechanism to finance through the Public Sector Development Programme schemes recommended by senators.

At a meeting of the Senate Standing Committee on Finance and Revenue, the government also reported an agreement between Khyber Pakhtunkhwa and the centre to extend sales tax laws to the provincially administered tribal laws which are currently exempt from the levy.

The Chairman of the Federal Board of Revenue, Tariq Bajwa, told journalists that a law to track down benami land titles for tax purposes was ready and would be introduced after the budget session of parliament.

The committee led by Senator Salim H. Mandviwala of PPP began deliberations on federal budget 2015-16 for amendments and recommendations to the National Assembly regarding fiscal and development measures for next year.

Senators were opposed to the introduction of “super tax” at the rate of 3pc and 4pc on individuals including association of persons and companies having over Rs50 million annual income to finance a part of expenditures on raising of new security apparatus and settlement of temporary displaced persons (TDPs) of Waziristan. Some of them proposed to make this contribution voluntary or the income threshold be brought down to Rs20m with reduced tax rate.

Finance Minister Ishaq Dar, however, said the expected collection through super tax would be around Rs20-22 billion that would be applicable to 170 companies, eight AOPs and three individuals with annual income exceeding Rs50 million.

He said the FBR had done a series of exercise and the reduction in income threshold would have affected thousands of people but negligible increase in tax collection and hence rejected due to higher political nuisance. The minister said current situation was very extraordinary because around Rs45bn would be required for security enhancement and around Rs55bn for the resettlement of TDPs.

He rejected call for seeking voluntary contributions, saying his previous experience with voluntary contribution for income support programme was disappointing because only a couple of people came forward with contributions.

The committee agreed to go ahead with 0.3pc tax on all banking transactions for tax filers and 0.6pc for non-filers over Rs50,000 per transaction but recommended that a policy message should go out in the shape of facilitation that tax filers were better off paying taxes and filing returns so that non-filers come into the tax net. Besides cash withdrawals, these tax rates would be applicable on demand draft, pay orders, SDRs, CDRs, STDR, call deposit receipt and RTCs.

The minister did not agree with a senator that electricity rates had been increased to reduce subsidy, saying tariff differential subsidy had been limited to small consumers worked out on the basis of tariff approved by the National Electric Power Regulatory Authority (Nepra). He said the government had provided about Rs2.6 trillion in power sector subsidies over the last six years.

Senators criticised the government for blocking disbursement of PSDP funds in first 11 months of the year and then releasing in the last month of the fiscal year, which they said resulted in misuse of funds. Secretary finance Waqar Masood Khan, however, explained that it was because of proportionate revenue collection that usually maximise in the last month.

Senator Fateh Mohammad Hasani from Balochistan recommended that like members of the national and provincial assemblies, senators should also be given at least Rs200m every year for development schemes. Other senators supported the demand.

Mr Dar said the practice of providing funds even to the MNAs had been blocked following a 2012 decision of the Supreme Court of Pakistan, put restriction on supplementary grants, re-appropriation of funds and discretionary funds for development even at the disposal of the prime minister.

Mr Dar said he himself challenged the decision because no government around the world could function without re-appropriation of funds or supplementary grants and nobody could deprive any government from this right to have control over funds.

He said the court had accepted his plea regarding supplementary grants and re-appropriation and conceded to have committed oversight. However, he said the case was still before the court that had not allowed discretionary funds to parliamentarians.

He assured the senators that he would work out some constitutional and legal means to spend development funds on the recommendations of the parliamentarians, irrespective whether they were members of the Senate or National Assembly.

The meeting was informed that a meeting attended by the prime minister and governor and chief minister of KP had decided to extend sales tax laws to provincially administered tribal areas of KP and a summary had been moved for its implementation at the earliest.

Source: Published in Dawn, June 10th, 2015

Regards,

Umconcept

 

Tags: , ,

Pakistan Federal Budget 2015-16: Text of Ishaq Dar’s budget speech

Pakistan Federal Budget 2015-16 Speeech:

Mr. Speaker,

1. Once again, as I have the honour of presenting the Budget 2015-16, I bow my head before Allah Almighty for untold and immeasurable blessings He has bestowed on this nation and the singular distinction He has conferred on Mohammad Nawaz Sharif, Prime Minister of Pakistan and his Government in restoring the health of a broken economy. The economic performance we have rendered in two years is unparalleled in the history of democratic governments. This has been made possible by the design of sound economic policies, first announced in PML (N) Manifesto for Elections 2013 and then incorporated and implemented in the Budget 2013-14 and since then faithfully and steadfastly observed and followed by the Government.

Mr. Speaker

2. This august House is well aware that when we took office, the most vicious rumour taking rounds in the local and international financial circles was the imminent default that Pakistan was set to make in June 2014. This was a clever guess based as it was on the level of available reserves and the payments falling due until that date. In the backdrop of completely dried-up foreign flows, as IFIs had declined to work with Pakistan, the reserves were destined only to travel south. However, we were determined to prove these economic pundits wrong and the country saw that not only we proved them utterly wrong but have steered the economy of Pakistan to safer shores.

3. In June 2013 we had a clear road-map of three objectives:

(a) Preventing Pakistan from default in 2014;

(b) Achieving macroeconomic stability by June 2015; and,

(c) Promoting inclusive economic growth for creation of job opportunities and providing resources to alleviate poverty from 3rd year onward.

4. We formulated policies and programs to achieve these objectives and we never hesitated in taking difficult decisions, no matter how unpopular, so long as they were critical for the revival of the economy. Accordingly, the economy of Pakistan has been stabilized and poised to grow at an accelerating rate.

Review of Economic Performance 2013-14

Mr. Speaker:

5. I would like to place before this august House the following key economic indicators, based largely on 9 or 10 months data for the current fiscal year:

(a) Economic Growth during 2014-15 has been provisionally recorded at 4.24% compared to the revised estimate of 4.03% last year, showing a rising growth trajectory. During 2008-13, the growth rate had averaged around 3% and hence this is the highest growth rate in seven years. The growth target for the year was 5.1%, which could not be achieved for the following reasons:

> Massive floods in September 2014;

> Economic disruption during August-December 2014 due political agitation;

> The massive decline in international commodity prices, particularly oil affecting the output of these and associated sectors;

> The unusually long and cold winter weather had a negative impact on the Rabi crops, including wheat;

> The output of large-scale manufacturing has been affected due to shortages in gas and electricity, despite improvements in their supplies.

> Credit to private sector has grown at a slower pace as commercial banks continued to lend to the Government.

(b) Per Capita Income, which stood at $1384 last year has increased to increase to $1512, showing a growth of 9.3%;

(c) Inflation, which had averaged around 12% during 2008-13 before our government, was recorded at 4.6% for Jul-May 2014-15, which is lowest in 11 years;

(d) FBR Revenues, which had registered only 3% growth in 2012-13, were up by 16.4% during 2013-14 and have risen by another nearly 13% in the first 11 months of 2014-15 and are expected to close at 15% increase;

(e) Fiscal Deficit, in June 2013 was at 8.8%, which was brought down to 8.2% within weeks. In. 2013-14, this was brought down to 5.5% of GDP. In the current fiscal year we are on course to achieve the target of 5%;

(f) Credit to Private Sector, grew by 11% during 2013-14. It is projected to further grow at 7% during the year. The share of fixed investment in credit has significantly increased compared to last year.

(g) Policy Rate of SBP was 10% in November 2013, which has now been cut to 7% during the current fiscal year. This is the lowest policy rate in decades. The commercial lending rates are determined by the policy rate and have been declining in line with the policy rate. It will help spur investment, as the cost of capital will decline significantly;

(h) Exports were $20.18 billion during Jul-Apr 2014-15 compared to $20.83 billion last year, showing a decline of 3%%, largely due to negative price effect in the global commodity markets. Even though we have exported larger quantities but because of lower international prices, we have realized lower values;

(i) Imports were recorded at $34.65 billion during Jul-Apr 2013-14 compared to $34.09 billion for same period in the current year, showing a marginal decline of 1.61%. More notably, imports of machinery have increased by an impressive 10.3% an indication of rising investment in the economy;

(j) Remittances were recorded at $12.89 billion during Jul-Apr 2013-14, rose to $14.97 billion for the same period this year, showing an increase of 16.14%, which is remarkable and for which I once again salute my expatriate Pakistanis for playing such a critical role in country’s economy;

(k) Exchange Rate has shown remarkable stability in the last more than a year, except for a brief period during August-September due to political instability. Presently, the rate is hovering around Rs.102/$ in the inter-bank market. For an economy like Pakistan, Exchange Rate has a pivotal position, as it impacts pervasively on all other variables.  Accordingly, a competitive and market determined stable exchange rate reduces uncertainty and boosts confidence of investors and consumers alike. The exchange rate stability we have achieved has not been witnessed in recent years and is source of rebuilding the credibility of our economy;

(l) Foreign Exchange Reserves were in a precarious state in June 2013. The State Bank reserves were at $6 billion, of which $2 billion were due to a swap that was payable in August and nearly $3.2 billion were falling due for repayments to IMF during the year, bulk of which in the first half. On 10th February 2014, SBP’s reserves had further declined to $2.7 billion. Resultantly, the overall reserves, including those held by commercial banks, were $7.7 billion. It looked as if the notorious rumors were finally becoming reality. However, Alhamdulillah, we have strengthened the economy against fluctuations in external markets. Today country’s foreign exchange reserves have climbed to about $17 billion, of which the SBP reserves are around $12 billion, showing that all the increase in reserves has come in SBP reserves. We are poised to take the reserves level to a historic high of nearly $19.0 billion during the year.

(m) Karachi Stock Exchange (KSE) Index stood at 19,916 on 11 May 2013, the day the elections, has now surged to around 34,000, showing an increase of 70%. Also, this increase meant an increase of about 40% in market capitalization.

(n) Incorporation of New Companies was recorded at 3664 during Jul-Apr last year while during the period in 2014-15, this number has increased to 4100, showing an increase of 11.9%;

6. In addition to above, we have accomplished a number of other successes in different areas, some of which are noted below:

(a) International Sukuk: We entered the international Sukuk market, after 8 years, in November 2014, by issuing a five year Sukuk aiming to raise $500 million, but we received $2.3 billion, nearly five times the subscription and decided to take $1 billion.  The proceeds of Euro Bonds and Sukuk have gone to retire an equivalent amount of domestic debt in the SBP and hence there is no increase in Public Debt due to this borrowing.

(b) Eligibility for IBRD: In the last budget I had informed this House about the resumption of policy lending from the World Bank and Asian Development Bank, which was suspended for lack of a stable macroeconomic framework before June 2013. After achieving macroeconomic stability and the requisite increase in foreign reserves, in February 2015, Pakistan is declared eligible again for IBRD facilities.

 

7. The above review of economic indicators and policy initiatives fully demonstrates the fact that the country has achieved macroeconomic stability. It clearly shows an economy that is moving in the right direction. The expert assessments I will be citing shortly are reflective of the rising confidence of our development partners as well as investors. Pakistan is offering such investment opportunities, which few countries in the region can match.  Accordingly, as we enter the third year we are confident that the year would bring even better economic results.

Mr. Speaker,

8. The picture painted above is not based exclusively on our own views. The international analysts and observers are all praise for our performance and potential for future growth. Some of these are worth bringing to the knowledge of this august House:

Japan External Trade Organization (JETRO) has declared Pakistan as likely to be second choicest place for FDI;

Goldman Sach’s Jim O’Neill has forecast that Pakistan would be world’s 18th largest economy by 2050 from its present 44th position;

Overseas Investors’ Chamber of Commerce and Industry (OICCI) has found that Business Confidence Index amongst its members, which stood at -34 has climbed to as high as +18;

Moody’s and Standard and Poor’s have both improved Pakistan’s outlook from negative to stable and recently from stable to positive;

Nielsen’s Global Survey of Consumer Confidence rose to 99 in the 1st quarter of 2014 from the lowest level of 86 in 3rd quarter of 2011;

David Darst, Chief Investment Strategist, Morgan Stanley, has said ‘Pakistan is set to take-off, it is a matter of time’;

Bloomberg News says that despite challenges (a) corporate earnings in Pakistan are soaring and (b) stocks have surged.

The Economist London in its 2nd May 2015 issue has praised Pakistan’s economic recovery;

World Trade Organization (WTO) Trade Policy Review, April 2015 has praised economic performance of Pakistan;

Financial Action Task Force (FATF), the international body for monitoring anti-money laundering and terrorist financing had included Pakistan in its “Grey List” in 2012. After Government’s actions including changes in laws, Pakistan has been included in the “White List” in February 2015.

Mr. Speaker

9. The goals we have set are our guide in the economic journey.

Our actions have been guided by these goals. The brief description of our performance, given above, and what will be highlighted later in this speech, exemplifies the faithfulness and seriousness with which we are working to realize this vision. A democratic government is answerable to Parliament and people and it would be held accountable on its promises made to both of them. While moving on to the third year of our Government, we continue to remain faithful to this vision and the third budget will fully reflect its application in our proposals.

Main Elements of Budget Strategy

Mr. Speaker

10. The main elements of our budget strategy are as follows:

(1) Reduction of fiscal deficit: We will continue to consolidate the gains we have made in reducing fiscal deficit. In 2015-16 we will target a deficit to 4.3% compared to 5% in 2014-15;

(2) Raising Tax Revenues: Part-II of the speech will deal with tax proposals. At this stage, however, I would say that the proposed reduction in deficit will be achieved through a combination of better tax collection and tight expenditure controls;

(3) Continued Focus on Energy: Energy is one of our key priorities. This can be judged by the fact that the Prime Minister is devoting considerable type to oversee developments in the sector.  A Cabinet Committee on Energy has been constituted, which is headed by the Prime Minister himself. Keeping in view the current gap in demand-supply of power in the face of high GDP target, we plan to bring 7000 MW on stream besides setting up 3600 MW LNG-based projects. By December 2017, we will bring 10600 MW in the system.  Beyond December 2017, other projects such as Dasu, Diamer-Bhasha, Karachi Civil Nuclear Energy and many other projects will also be completed.

(4) Exports Promotion: In this budget, we would be announcing additional measures to incentivize exports and taking other measures to ease the cost of doing business and improving the overall regulatory regime to facilitate exporters.

(5) Investment to GDP Ratio: The Investment-to-GDP ratio, which was registered at 12.4% during 2012-13, improved to 13.4% during 2013-14 and is provisionally estimated at 13.5% for the current fiscal year. The combined effect of increased public sector investments has also played a role in reversing the declining trend.  We are projecting this ratio to rise to 16.5% during 2015-16.

(6) Public Debt Management: Debt management has received special attention in our overall efforts for fiscal management. The fiscal consolidation we have achieved has paved the way for a reduction in public debt, which fell from 63.9% in 2012-13 to a now projected level of 62.9% at the close of current fiscal year. In the next three years, Debt to GDP ratio will be brought down to less than 60% in accordance with the provisions of the Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005, InshaAllah.

(7) Benazir Income Support Program (BISP): This program is an effort to provide relief to the poor and vulnerable people of society as a matter of our responsibility and their right. The following have been the main achievements in this program:

i. From Rs.40 billion in June 2013, we have increased the size of the program to Rs.97 billion during the current year. We are further enhancing this allocation to Rs.102 billion, representing more than 155% increase since 2012-13;

ii. Until 2012-13, the cash transfer program was covering 4.1 million families, which would be taken to 5.0 million during the current year. By end of next financial year the number of beneficiary families would increase to 5.3 million, showing an increase of 29% since 2012-13;

Besides the above program, we are providing an additional Rs.2 billion to Bait-ul-Maal for supporting its welfare activities, notably the hospitalization costs for the vulnerable people. The allocation has been increased by to Rs.4 billion for 2015-16, which is 100% increase.

(8) Development & Promotion of ICT Sector:- A number of initiatives were announced in the last budget for the development of promotion Information and Communication Technology (ICT). These initiatives have been operationalized with the following key features:

> Universal e-telecasters: A project for Universal e-telecasters with an investment of Rs.12.0 billion has been approved. In the first phase 500 telecentres would be established in all provinces including FATA. For this purpose, 217 land sites across Pakistan have been selected. Program is at advance stage of implementation and would soon be rolled out.

> Improved Connectivity for Remote Areas: For connectivity of remote area the Government has decided to invest Rs.2.8 billion laying optic fiber cables. Work on this program is going on at fast track basis. In consultation with Provincial Governments 128 tehsils and towns have been identified nationwide, which do not have optic fiber connectivity. Rural telecommunication is another program, which envisages investing Rs.3.6 billion on connectivity of rural un-served areas with the rest of country.       Rationalization of International Clearing House (ICH): In October 2012, a new policy for International Clearing House (ICH) was initiated. There have been several problems with the policy as it resulted in losses to users and increase in grey traffic. Since government intends to provide relief to people, therefore, we have reformed this policy and rationalized the rates of international calls. This is benefiting expatriate Pakistanis and promoting legal traffic, which has increased from 367 million minutes per month in November 2014 to 1,100 million minutes per month by now – a three fold increase.

> Prime Minister’s National ICT Scholarship Program: As announced in the last budget, 500 IT scholarships with a total cost of Rs.125 million will be provided to the talented students from rural/non-metropolitan areas. The program provides fully funded 4 years undergraduate degree scholarships in ICT related disciplines in the leading ICT universities of Pakistan. Under the program 480 students availed the scholarship by joining in 21 top Pakistani universities. The program will be continued in the future.

Medium-term macroeconomic framework

Mr. Speaker

11. As always, our budget strategy is embedded in a three year medium term macroeconomic framework spanning the period 2015-16 to 2017-18, the main features of which are as follows:

(a) GDP growth to gradually rise to 7% by FY 2017-18.

(b) Inflation will be contained to single digit;

(c) Investment to GDP ratio will rise to 20% at the end of medium term;

(d) Fiscal deficit would be brought to down to 3.5% of GDP;

(e) Tax to GDP ratio will be increased to 13%;

(f) Foreign exchange reserves would be maintained above $20 billion, inshaAllah;

12. In view of the performance we have registered in the first two years in office, we are confident to achieve the goals set out in the medium-term framework. We have no doubt that we would remain on course while pursuing the above framework.

Development plan

Mr. Speaker

14. The current Five Year Plan 2013-18 is a comprehensive roadmap and sets timelines for achieving high growth rate. The outlook for 2015-16 is positive with a significant recovery in growth momentum.  The growth of GDP for 2015-16 is targeted at 5.5% and gradually steering it to over 7 per cent by 2017-18. In order to achieve the targeted growth rate of 5.5 per cent, the sectoral contributions are agriculture (3.9%), industry (6.4%) and services (5.7%).

15. The plan is geared towards developing human and social capital of the country by enabling universal access to education and health facilities, empowering women and eradicating poverty; thereby capitalizing the demographic dividend and increasing the total factor productivity.

16. Strategies have been devised to encourage public-private partnerships in the development process. Transport, communications, financial, industrial, and services sectors have been identified as important areas with high growth potential. Consequently, comprehensive action plans have been outlined to improve growth rates for these sectors and increase their respective contributions to the GDP.

17. National Development Program of worth Rs.1,513 billion is being earmarked for 2015-16. The development program 2015-16 includes Rs.700 billion as federal PSDP. In addition to increasing the public Investment, concerted efforts are being made to entice the private investment through a variety of mechanisms such as promoting public private partnerships, FDI, creating special economic zones with fiscal incentives.

18. These measures are expected to boost economic growth for key sectors and increase their respective contributions to the GDP.

19. I would now present some highlights of the development budget, focusing mainly on the sectors that will contribute most to economic development.

Water

20. The most important sub-sector claiming resources in our development plan is the water sector, where we are investing Rs.31 billion for projects in various parts of the country. A project that will be the future lifeline of Pakistan is the Diamir Bhasha Dam, which will store 4.7 MAF of water and generate electricity of 4500 MW. We have provided Rs.15 billion for land acquisition during the year and have kept a provision of Rs.6 billion for construction of lot 1 out of 3. In addition, another important hydropower project is Dasu, which will have the capacity to generate 2160 MW.  We are committed to make these two dams a reality and preparatory works has already started.

21. Water projects in Baluchistan are the second most important focus of water sector investments comprising construction of delay action dams, flood dispersal structures, canals and small storage dams. Main focus will be on the existing projects that can be completed within the next 1 – 2 years. In this regards, work is in advanced stages on projects such as Kachhi Canal (DeraBugti and Nasirabad), Naulong Storage Dam (JhalMagsi), extension of Pat Feeder Canal to DeraBugti and ShadiKaur Dam (Gawadar). Besides these large projects, we will also invest in building small dams in the province. This year we will start work on Basool Dam in Gawadar.

22. Similarly, in Sindh, projects that are advancing gradually are Rainee Canal (Ghotki and Sukkur), extension of Right Bank Outfall Drain from Sehwan to sea, and Darwat Dam.

In addition, this year we will start the work on MakhiFarash Link Canal project. In Punjab work on channelization of NullahDeg and Ghabir Dam (Chakwal) will commence.

In Khyber-Pakhtunkhwa, other than Dasu, funds will be provided for Keyal Khawar hydropower project, and other small dams.  In FATA funding for Kurram Tangi in North Waziristan, and Gomal Zam Dam in South Waziristan will continue.

23. Besides, numerous schemes of lining of water-courses will be undertaken in Khyber-Pakhtunkhwa, Sindh and Punjab to reduce water wastage together with flood protection and drainage schemes all over the country.

Power

24. I have already stated the focus we have on the energy sector.

We have taken a number of steps to address structural problems of the sector including reduction in system losses, improvement in recoveries, elimination of theft and settlement of inter corporate circular debt. However, our real focus is on developing additional resources of energy so as to permanently overcome energy shortages.

25. As in the past, we have allocated the largest amount of resources to add new and economical capacity in the country. During the current year a sum of Rs.248 billion will be invested in this sector up from Rs.200 billion allocated in last year’s budget. Of this, Rs.73 billion will come from the PSDP. The government is aiming to almost end load shedding by December 2017.

26. Large projects that are part of this year’s allocation are:

> Rs52 billion have been allocated for Stage 1 of Dasu Hydro Power Project which will produce 2160 MW of power;

> Rs21 billion have been allocated for land acquisition and construction of Lot 1-5 for Diamir-Bhasha Dam and Hydropower Project having a reservoir of 8 MAF and 4500 MW of power;

> Rs11 billion have been allocated for Neelum Jhelum Hydro Power Project having a capacity of 969 MW;

> Rs11 billion have been allocated for completion of Tarbela-IV Extension Hydro Power Project with a capacity of 1410 MW;

> Rs5 billion have been allocated for Up-gradation of Guddu Power Project having a capacity of 747 MW of highly economical power;

27.  In addition a number of other projects such as two Karachi

> Nuclear Coastal Power Projects (2200 MW) with Chinese assistance;

> Chashma Civil Nuclear Power project (600 MW); Golan Gol Hydro Power

> Project (106 MW); Evacuation of power from wind power projects at

> Jhimpir and Gharo Wind Clusters; Interconnection of Chashma Nuclear Power Plants III and IV

28. This year we will start work on new important projects such as:

> Interconnection scheme for import of power from CASA-1000

> Evacuation of power from 2160MW Dasu HPP Stage-I

> Evacuation of power from 1320MW Power Plant at Bin Qasim

> Alliot switching station and its interconnection with SukiKinari HPP

29. Addition of a number of hydel projects, coal based plants, wind energy and nuclear projects will correct the energy mix to provide cheap electricity to the people of Pakistan while improvement of the transmission and distribution system will reduce the system losses. The drive against energy theft will further reduce the burden on the common man.

Highways

30. Pakistan’s location is such that it can play a central role in regional connectivity. In order to maximally exploit the natural advantage of its geography and to translate it into economic gains, there is an imperative need to invest in communication infrastructure. Accordingly, we have allocated Rs.185 billion for construction of roads, highways and bridges, compared to last year allocation of Rs.112 billion, which is an increase of 65%.

31. An area of our priority in the highways sector is the completion of Lahore-Karachi Motorway. We firmly believe that this 1152 Kilometres long highway will change the fate of this country.  It will provide jobs, farm-to-road connectivity and economic growth in Pakistan. In the Budget 2015-16, we have allocated Rs.20 billion for Lahore-Abdul Hakeem  Section which is about 230 kilometers long.  Similarly, an allocation of Rs.61 billion has been allocated for Multan-Sukkar Section (387 kilometers), whereas in order to complete the Sukkur-Hyderabad Section (296 kilometers), a provision of Rs.10.5 billion has been made in the PSDP.

32. Apart from completion of various segments of Karachi-Lahore Motorway, we have made allocations to start work on other section of China Pakistan Economic Corridor. In order to acquire land and undertake technical studies of Islamabad-Dera Ismail Khan Route, we have made provision of Rs.10 billion in this budget. Furthermore, we plan to start Thakot-Havelian link, which is the priority section of Raikot-Islamabad KKH Phase II project for which we have allocated Rs.29.5 billion.

33. We have earmarked resources for numerous projects in Highways sector in this budget. Some of them are: Gwadar-Turbat-HoshabSection of Gwadar-Ratodero Roadwhich is  200 kilometers long, Widening and improvement of N-85  Hoshab-Nag-Basima-Surab Section, Construction of Faisalabad-Khanewal Expressway, LowariTunnel and Access Roads in Dir etc.

34. In addition to above, as a gift to the people of Karachi, we are establishing a world class bus transit system namely Green Line Bus Transit System which will operate between Saddar and Surjani Town and will be able to commute 300,000 passengers per day. This project is planned to be completed by December, 2016 with a total cost of about Rs.16 billion.

35. Islamabad-Lahore Motorway (M2) was a path-breaking project of Pakistan Muslim League (N) government which revolutionized road-travel in Pakistan. Such highways require re-surfacing after every 8-10 years. However M2 has not received re-surfacing in last 18 years. Under the directions of the Prime Minister Muhammad Nawaz Sharif, the government has undertaken the initiative of M2 re-surfacing with financing from private sector.

Railways

36. Railway is supposed to provide cheaper, faster and convenient mode of passenger and freight transport. Accordingly, its development is one of our important priorities.

37. Newly launched Green Line train express between Islamabad and Karachi is the result of efforts of the Railways Ministry. However, this is the beginning of a bright future. Pakistan Railways will target its investments around locomotives, bogies, tracks, signaling systems, and improvement of existing railway stations.

38. For the current year’s budget the following projects will be our key priority:

> Work on doubling of track from Khanewal to Raiwind, and  from Shahdara to Lalamusa will be completed during FY 2015-16. Both of these tracks will cover major portion of the north-south mainline.  In coming years Pakistan Railways will aim to double the remaining tracks. In addition, we hope to complete the rehabilitation of track from Karachi to Khanpur. Work on track rehabilitation on Khanpur-Lodhran section will continue.

> I am also happy to state that strengthening and rehabilitation of 159 weak railway bridges will be completed by June, 2017.

> Pakistan Railways faces shortage of locomotives and rolling stock have been made in the current as well as next year’s budget.  Allocations have been made in the current budget to add 170 engines to the system through procurement while 100 old engines will be repaired for use.

> Similarly around 1500 new wagons/bogeys are also being arranged. Pakistan Railways is taking these steps to improve the travelling experience of its customers. In order to further enhance the convenience of travelling with Pakistan Railways, this budget has allocated special amounts to renovate and upgrade railway stations in various cities.

> From this year we plan to start working on an important project that will lead to improvement of signaling system on Lodhran-Khanpur-Kotri Section and provision of centralized traffic control.

> Allocations have been made in this budget to procure additional wagons for freight operations and a feasibility study is being commissioned to study the possibility of a dedicated freight corridor.

39. In this budget, we have allocated Rs78 billion, of which Rs41 billion are in PSDP for 52 development schemes and Rs37 billion for pay & pensions of railway employees. Private and international investments are expected during the course of the financial year in this sector, as well.

Human Development

40. People are the most precious resources of any nation.

Therefore we consider the expenditures on human development as investments as they lay the foundation of future growth at an accelerated pace.

41. Initiatives that will be undertaken for the promotion of this sector are as follows:

 

> A sizeable allocation of Rs.20.5 billion has been made for 143 projects of the Higher Education Commission, which will support development plans of different universities all over the country. It may be noted that on the current side also a hefty allocation of Rs.51 billion is made for HEC. Thus a combined outlay of Rs.71.5 billion will be made for higher education. The combined allocation represents about 14% increase, which is sizeable considering the tight fiscal conditions prevailing in the country.

Health sector service delivery has been fully devolved to the provincial governments. As per the decision taken by the Council of Common Interests in 2010, the Federal Government continued to support the provincial Governments till this year for the national health and population welfare programs. From the next fiscal year, we expect the provinces to fund for these initiatives. However, the Federal Government will continue to lend technical support to the provincial Governments in execution of important national programs.

We had announced first in the PML (N) Manifesto and reiterated by the Prime Minister our resolve to increase the expenditure on education as percentage of GDP to 4% during our tenure. We continue to remain committed to this goal. However, it should be noted that a major share of education expenditure is the responsibility of the provinces. The share of federal government in this expenditure is only 20%. Moving from the present level of 1.67% of GDP to 4.0% of GDP will require the federal government to increase its spending from 0.34% of GDP to 0.80% and the provinces to increase from 1.33% of GDP to 3.20%.

The federal government will fulfill its commitment and after the recent discussion in the National Economic Council (NEC) Meeting, I am confident that the provinces will come forward and fulfill their responsibilities.

TDPs and Security Enhancement: Special Development Program

Mr. Speaker

42. Our country has rendered enormous sacrifices in both blood and treasure in fighting terrorism. Yet this is a menace that requires a long-term effort to eradicate. The operation Zarb-e-Azb had been initiated with a steely resolve to uproot this peril for good, and our Armed Forces have fought valiantly and accomplished exemplary successes, for which they deserve the gratitude of every Pakistani.  However, the atrocities committed by retreating and desperate remnants elements in Peshawar and Karachi are a reminder that we cannot be complacent in this war.

43. These events have established the need for further reinforcement in country’s internal defenses with objectives of protecting the areas from where the terrorists have been evicted, rehabilitating the displaced persons allowing them to honorably restart their lives. To cater for these needs Government is undertaking a Special Development Program of Rs.100 billion to enhance the security apparatus and rehabilitate the affected areas and resettle the temporarily displaced persons (TDPs).

 

MDGs Community Development Program

44. With a view to promote achievement of MDGs, and in the larger national interest of diffusing development works at the local level, the Government has initiated a development program for undertaking small development schemes in the fields of health, education, small roads linking farms to markets, spurs and small dams, being selected and implemented by the provincial governments with the participation of community representatives. For this program Rs.20 billion have been allocated in the 2015-16 budget.

China-Pak Economic Corridor

45. China-Pak Economic Corridor is the vision of the Prime Minister Nawaz Sharif top Chinese leadership for reviving and rebuilding the historical connectivity between China and Pakistan and to eventually enable extended connectivity to central and West Asia. Kashgar-Gawadar linkage will not only enhance trade but will also act as an energy corridor. We are proud of this flagship project that will transform Pakistan’s economy.

46. Pakistan and China have jointly signed projects worth about $46 billion that include building of roads and rail networks and telecommunications, development of Gwadar Port and major projects for additional power and improvement in power transmission sub-sector.

47. Some of the key projects proposed to be undertaken under the CPEC program are as follows:

> 2 x 660 MW Coal-Based Power Projects (IPP) at Port Qasim;

> Power Evacuation from Mitiari to National Grid (IPP);

> 3.5 MT/A Coal Mining and 2×330 MW Power Plants based on Thar Block-II SECMC;

> Solar Power Park at Bahawalpur;

> 2793 MW (Three) Hydro Power Projects;

> Multan-Sukkur section (387Km) of Karachi-Lahore Motorway;

> Karakoram Highway (Phase-II) Raikot to Islamabad;

> Fiber Optic;

> Rehabilitation & Up-gradation of Karachi-Lahore-Peshawar (ML-

1) Railway Track;

2) Gawadar Package;

3) East Bay Expressway at Gawadar (18.98 Km);

4) Jhimpir Wind-Power 200 MW;

5) 2 x 660 MW Coal-Based Power Projects at Sahiwal;

6) Jetty + Infrastructure at Gaddani as IPP (preferably) or Public Sector;

48. The government is determined to fulfill the necessary financial requirements of CPEC Projects.

Development of Gwadar

49. Keeping in view the significant role Gwadar has to play for strengthening the economy of Pakistan in the coming days, the government takes the development of this area very seriously.

Accordingly, we are allocating significant resources for a host of development projects aimed at uplift of this area. Some of them are:-

a. Rs.3 billion are being allocated in 2015-16 for New Gwadar International Airport

b. A provision of Rs.2 billion has been made for Gwadar Development Authority in next budget, and

c. For necessary facilities of water treatment, supply its distribution in Gwadar, we are making a substantial allocation of Rs3 billion.

Status of Initiatives in the Budget 2014-15

Mr. Speaker

49. Before I announce the new initiatives in the Budget 2015-16, I find it necessary that I bring to this House’s attention the status of initiatives I had announced in the last budget.

In the Budget 2014-15, the government had announced to undertake a number of new initiatives aimed at strengthening various sectors including textiles industry, exports, agriculture, health, telecommunication, taxation and social safety nets. Such initiatives included the establishment of various new organizations e.g. Land Port Authority (LPA), Mortgage Refinance Company (MRC), National Food Security Council (NFSC) etc.

Furthermore, a number of new schemes were announced to be launched including Credit Guarantee Scheme for Small and Marginalized Farmers, Reimbursement of Crop Loan Insurance Scheme and introduction of Health Insurance System etc.

Being fully cognizant of the significance of these well-designed initiatives, we have strived hard for their implementation over the last year and I am proud to announce that despite the resources constraints and the gigantic economic challenges, out of total 34 new initiatives announced in the previous budget, 20 have been fully implemented while the work on the remaining is continuing.

Special Initiatives for 2015-16

Mr. Speaker

50. Pakistan is poised to grow at an accelerating pace. At this stage of transition we need to consolidate recent gains, hasten the process of reforms and take required measures to enable some of those sectors that have not performed as per expectations. In this section I will confine to the last of these objectives as I have already dealt with the other two. I now outline some of the measures we propose in the budget for enabling those sectors to perform to their potential.

Exports Promotion

51. I have already noted somewhat weak performance of the exports during the year. The main reason behind this is the major decline in global commodity prices, particularly those of cotton and rice. Even though a small country cannot affect global prices, we need to look at some of the irritants that may be impeding our exports competitiveness. The following measures are being adopted for promotion of exports:

(1) EXIM Bank of Pakistan (Specialized DFI) will be helpful in enhancing export credit and reducing cost of borrowing for exporting sectors on long term basis and help reduce their risks through export credit guarantees and insurance facilities. The Bank will start operations in 2015-16.

(2) Exports Refinance Facility (ERF): In the last budget, the Government, through the State Bank of Pakistan, had arranged to reduce its mark-up rate on exports finance from 9.4% to 7.5%, This rate was reduced in February 2015 to 6.0%, and it will be further brought down to 4.5% from 1st July 2015;

(3) Long Term Finance Facility: In the last budget, the Government, through the State Bank of Pakistan had arranged to reduce its mark-up rate on long term financing facility for 3-10 years duration from around 11.4% to 9.0% to allow export sector industries to make investments on competitive basis. This was further reduced to 7.5% in February 2015 and will be further brought down to 6.0%;

(4) Removing Anti-exports bias in Imports: A series of measures being announced in this Budget relating to rationalization of tariff and taxes having bearing on the export industries will gradually remove the anti-export bias in country’s tariff policy and make exports more competitive.

(5) Export Development Initiatives: Ministry of Commerce is formulating initiatives for (a) production diversification, (b) value addition, © trade facilitation, (d) enhanced market access and (e) institutional strengthening. An allocation of Rs.6 billion has been made to support initiatives. The Export Development Fund (EDF) Board has been reconstituted to also support this program.

(6) Establishment of Pakistan Land Port Authority: The initiative for establishing the Land Port Authority of Pakistan was announced in the last budget. We have completed the requisite formalities for its formal launching. In the meanwhile we have invested Rs.352 million for the establishment of infrastructure at the Torkham Border to enable it to operate under the conditions of a modern port environment.

Textiles Package

52. Textiles Industry is the mainstay of Pakistan’s economy. It accounts for more than 50% of our exports value and is the single largest employment provider in the manufacturing sector. It has a very long production chain from cotton picking to ginning, spinning, weaving, knitting, processing and stitching, whereupon considerable value-addition is done at each step. In recognition of its significance, the government had announced a special package for Textiles Sector in the Budget 2014-15.

The following facilities announced in the package shall remain available for the textile sector during the FY 2015-16:-

(1) Under Textiles Policy 2014-19 financial package of Rs.64.15 billion has been approved in order to double the textiles exports and create 3 million additional jobs by the year 2019.

(2) To resolve the various issues pertaining to textile sector and for implementation of Textiles Policy 2014-19, the government has restructured the Federal Textile Board with majority members from the private sector.

(3) The benefit of Drawback of Local Taxes & Levies Scheme shall remain available for the textile exporter in the FY 2015-16 under which they shall be entitled to the drawback on FOB values of their enhanced exports if increased beyond 10% of their previous year’s exports, as per following rates:

a. Garments = 4%,

b. Made-ups = 2%; and

c. Processed fabric = 1%

(4) Since July 1, 2015, Export Refinance Facility and Long Term Finance Facility will be available for textile-exporters at the most reasonable rates of the history i.e. at 4.5% and 6% respectively.

(5) The Custom Duty on import of textile machinery under SRO 809 is zero for the Year 2015-16 as well.

(6) In order to facilitate and incentivize the investments in plants and machinery, Technology Up-gradation Fund Scheme will be launched in the FY 2015-16, as per the provisions of Textiles Policy 2014-19.

(7) Government is committed to introduce latest seed technology.

To this end, amendments in Seed Act have been passed by the National Assembly, whereas Plants Breeders Right Act will be also be promulgated on priority basis.

(8) Spadework has been completed on a mega project worth Rs 4.4 billion for training of 120,000 unskilled men and women over a period of 5 year. This scheme shall be launched in FY 2015-16.

Agriculture

53. Agriculture remains a major focus of our government despite the devolution of much of the operational responsibilities to the provinces. It is on the agenda of the government to take requisite measures to give positive price signals to farmers, protect them from vagaries of market fluctuations and support them in the face of natural calamities.

54. A number of tax incentives are provided to help agriculture sector, which be discussed in Part-II. Here I give an account of measures we had announced last year:

a. Credit Guarantee Scheme for Small and Marginalized Farmers:

The Credit Guarantee Scheme announced in the last budget has been made operational. Under the scheme, the Government, through the State Bank of Pakistan, will provide guarantee to commercial, specialized and micro finance banks for up to 50% loss sharing. The scheme will cover farmers having up to 5 acres irrigated and 10 acres non-irrigated land holdings. It will benefit 300,000 farmer households/families with a loan size up to Rs.100,000. Total disbursement under this scheme will be Rs.30 billion while the government will have a contingent budget cost of Rs.5 billion.

b. Crop Loan Insurance Scheme (CLIS): Crop loan insurance scheme is already in operation and will continue in the future.

c. Livestock Insurance Scheme: Livestock is contributing more to agriculture than the major crops. Recently, significant investment has been made in this sector. To encourage more investments and to incentivize farmers to engage in livestock development, last year we announced a scheme for reimbursement of premium for livestock insurance to mitigate the risk of losses of small livestock farmers.  This scheme is now operational and allows small farmers having 10 cattle to get this support. The scheme will cover livestock insurance in case of calamity and disease.

d. Agriculture Credit: We have given boost to agriculture credit, as we know the role of credit in enhancing the output of agriculture. During the year, we had targeted a credit flow of Rs.500 billion, compared to Rs.380 billion during 2013-14, an increase of 32%. I am pleased to inform this House that in first 10 months of the year 2014-15, the credit to agriculture has been registered at Rs.369 billion, which is in line with our target. For the next year, we are targeting a 20% increase to take it Rs.600 billion. Together with the insurance schemes mentioned earlier, the farmers will have much better access to financial sector than in the past.

e. Interest Free Loans for Solar Tube Wells: In order to facilitate the small growers and to reduce heavy expenditure incurred on diesel/electricity tube wells, it has been decided after the approval of Prime Minister Muhammad Nawaz Sharif to provide interest free loans for setting up new solar tube wells or replacing the existing tube wells with solar tube wells.  It is estimated that the cost of half cusec solar tube well may be up to Rs1.1 million.  Against a deposit of Rs.100,000 the government will provide interest free loans through the commercial Banks. The government will pick up the mark-up cost on these loans. Under this scheme it is proposed to provide mark-up free loans for 30,000 tube wells in the next 3 years. All farmers with landholdings up to 12.5 Acres will be eligible to apply for this loan. In case the number of applications in any one-year is more than 10,000, the beneficiaries will be selected through transparent balloting. After installing solar tube well, a farmer using diesel engine for five hours a day will save Rs.1660 per day and a farmer using electric pump for five hours a day will save Rs.466 per day in running costs.

f. Increase in the Value of Production Index Units (PIU): The present value of PIU was fixed at Rs.2000 in July 2010. This is woefully shortage of the current values of agriculture land. In order to enable farmers to raise larger financing facilities, it has been decided to increase the PIU to Rs.3000 with effect from 1st July 2015.

55. Prime Minister’s Health Insurance Scheme: Under this scheme, insurance shall be provided for tertiary health care. In 2015-18, the premium cost of the scheme will be Rs.9 billion. Initially, the scheme will be launched in 23 districts and coverage for hospitalization for several diseases. The project coverage will be gradually increased to 60% of poorest segments of population over the next three years. For areas falling under Federal Government responsibility, such ICT, FATA, GB and AJK, the secondary medical coverage will also be provided. The targeting of population will be done on the base of poverty score methodology that is used for the BISP.

Prime Minister’s Special Schemes

56. In fulfillment of our promises made during the election campaign regarding the welfare especially that of the youth, the government announced the launching of special schemes in Budget 2013-14 on the orders of the Prime Minister Muhammad Nawaz Sharif.

I would like to present an overview before this House as to how these schemes have benefited the people:-

(a) Prime Minister Youth Business Loans (PMYBL) Scheme: This scheme was started for promotion of youth entrepreneurship and eradication of unemployment. Based entirely on merit and transparency, this scheme offers loans at subsidized mark-up rates.  It is encouraging to note that after National Bank of Pakistan and First Women Bank Limited, 7 privatized banks have also joined this program. So far, more than 15000 loans have been approved under this scheme. About 20,000 applications are in under process. In the Year 2015-16, the mark-up rate for borrower is being lowered from 8% to 6%, a reduction of 2%.

(b) Prime Minister’s Youth Skills Development Program: This program intends to promote capacity building and giving employment to unemployed educated youth through training in 100 demand-driven trades across the country. Up till now 25,000 youth have benefitted from the said program, whereas the process for training of another 25000 is at an advanced stage. For the year 2015-16, the Program is being extended to include Madrasah students, juvenile prisoners and the victims of terrorism.

(c) Prime Minister’s Interest Free Loan Scheme: Under this scheme, interest free loans of Rs.50,000 average size are being made available to the men and women from households with a score of up-to 40 on the Poverty Score Card (PSC) and with little or no access to banks or microcredit institutions. In 2014-15, Rs.1.75 billion has been released for this scheme. So far, this scheme has benefited 44,000 persons and it has shown 100% recovery rate.

(d) Prime Minister’s Fee Reimbursement Scheme for Students of Less Developed Areas: Through this scheme, Federal Government pays tuition fee for all the students registered in Masters and Ph.D programs in HEC-approved public sector educational institutions who are domiciled in less developed areas of Baluchistan, Gilgit, Baltistan, FATA, Interior Sindh, Southern Punjab (Divisions of Multan, Bahawalpur & DG Khan), Districts of Layyah, Mianwali, Bhakkar, Khushab and Attock and less developed areas of KPK (LakkiMarwat, Batgram, Kala Dhaka/Torghar, Kohat, Bannu and Hangu).  A total of 41871 students benefited in this year, whereas average fee of Rs. 35,000 per student has been borne by the Federal Government. To ensure maximum transparency and facilitation, HEC has designed Student Service Portal for online applying as well as for maintaining data of beneficiary students of this Scheme. This scheme has helped enhancing the enrolment by 100%.

(e) Prime Minister’s Youth Training Program: will provide one year internship to unemployed educated youth nationwide who have completed 16 years of formal education. This program will build their capacity, enhance the employability, groom the skills and will provide experience to the youth for the job market. In this regard, the preliminaries have been completed and the scheme shall be launched in the Year 2015-16, wherein 50,000 internships shall be extended in the first phase, both in public and private organizations and a stipend of Rs.12000 per month per student shall be paid. The internships shall be distributed on the basis of NFC quota.

(f) Prime Minister’s Scheme for Provision of Laptops to Talented Students: Under this scheme, laptops are procured through open competitive bidding under PPRA Rules and under the vigilance of Transparency International Pakistan, which are then delivered to public sector universities/institutions across Pakistan and AJK.  70,000 laptops have been distributed so far in this manner. In addition, 700 laptops have been manufactured locally on a state-of-the-art laptop Assembly plant. It will additionally help in technology transfer as well as creation of jobs.

57. In total, Rs.2 billion are being allocated in FY 2015-16 for execution of Prime Minister’s Special Schemes.

Performance Management & Compensation system

58. A key challenge for development is lack of an effective performance management and aligned compensation system in public sector resulting in large gaps in effective delivery of public services. Therefore, the most important single theme for reform across all areas is promotion of institutional efficiency through Performance Management and Compensation System at an individual, departmental or collective level. In this regard, the Prime Minister of Pakistan has constituted a Performance Based Remuneration Committee. On initial recommendations of the said Committee, a lump sum amount of Rs1 billion is being allocated in the Budget 2015-16 for compensating high performance Ministries / Divisions and individuals for achieving pre-determined results.

Budget Estimates

Mr. Speaker,

59. Now I turn towards the estimates of revenues and expenditures for the next fiscal year.

60. Gross revenue receipts of the federal government for 2015-16 are estimated at Rs4,313 billion compared to the revised figures of Rs3,952 billion for 2014-15, showing an increase of 9.1%. We have set an ambitious target for tax collections, as without collecting more taxes we cannot hope to increase development spending that is crucial for economic growth. I shall share more details of this in Part-II of my speech.

61. The share of provincial governments out of these taxes will be Rs1,849 billion compared to Rs.1,575 billion revised estimates for 2014-15, showing an increase of about 17.4%. For the year 2015-16, net resources left with the federal government will be Rs.2,463 billion compared to the revised estimates of Rs.2,378 billion for 2014-15, showing an increase of 3.6%. Federal Government recognizes that the provincial governments have increased responsibilities of social sector service delivery under the new arrangements.  Therefore, we are consistently raising the level of provincial transfers to enable them to improve the social services and law and order for the people of Pakistan.

62. Total expenditure for 2015-16, is budgeted at Rs.4,089 billion compared to the revised estimates of Rs.3,902 billion for 2014-15, showing meager increase of 4.8% which is lower than the target inflation rate for 2015-16.

Viewed within the overall increase, the government expenditure in real terms is actually contracting instead of expanding. This approach of gradually increasing the revenues and reducing the expenditures in real terms will make us self-reliant and sustainable.

63. The current Expenditure is estimated at Rs3,128 billion for 2015-16 against a revised estimate of Rs.3,151 billion for 2014-15, showing an actual decrease in expenditure in nominal terms.  However, we have catered for the needs of the Armed Forces keeping in view the security challenges. The defense budget is being increased from the Rs.700 billion for 2014-15 to Rs.780 billion for 2015-15, which is an increase of about 11%.

64. The development budget has been adequately funded in order to meet the investment requirements of a growing economy. Against a revised estimate of Rs.542 billion for PSDP during 2014-15, and for 2015-16 we have budgeted Rs.700 billion showing an increase of nearly 29%. This also includes the Special Development Program for security enhancement as well as for rehabilitation and resettlement of TDPs as I have explained earlier.

65. As I said earlier, we have brought down fiscal deficit to 5% in 2014-15. We are targeting to reduce it further to 4.3% in 2015-16. The federal deficit is projected at Rs.1,625 billion for 2015-16 compared to the revised estimate of Rs.1,524 billion for 2014-15.  With surplus contribution from provinces of Rs.297 billion from the provinces, compared to a revised deficit of Rs.142 billion in 2014-15, we have projected an overall fiscal deficit of Rs.1328 billion for 2015-16, compared to the revised estimate of Rs.1383 billion in 2014-15.

PART-II

Mr. Speaker,

Now I present Part-II of the speech which consists of tax proposals.

1. The country needs adequate fiscal space for spending more on development and welfare of its people. Our government believes in taxation in a growth paradigm. We have to enhance our efforts for resource mobilization and for having an equitable and just tax system. Like last year, this time again we have made conscious efforts so that the burden of our tax proposals should not affect unprivileged and poor. Our proposals will ensure that affluent classes and specially those who do not pay taxes should come forward and contribute towards this national cause.

Mr. Speaker,

Broad Principles of Taxation Proposals

2. The proposals for the budget 2015-16 are mainly based on the following principles:-

i. Second phase of withdrawal of exemptions to further eliminate the discriminatory tax exemptions and concessions.

ii. Expand the scheme of differential taxation for filers and non-filers for penalizing non-compliance without adding any further burden on the compliant.

iii. Customs tariff be rationalized to reduce both the number of slabs and the maximum duty rate.

iv. Reviewing tax laws and procedures to cut down on discretion.

v. Removal of sectoral distortions in domestic taxes.

vi. Measures for broadening of the tax base and documentation of economy.

vii. Increasing the share of the direct taxes.

Revenue Measures

3. I will now give a brief summary of the Revenue measures proposed in the budget:

a. Change in Rate of Tax and Taxable Holding Period for Securities:

Rate of Capital Gains Tax for Tax Year 2015 was increased to 12.5% for securities held up to 1 year and 10% for securities held for a period between 1 and 2 years. In line with the policy of increasing rates in phased manner, it is proposed to increase the rates from 12.5% and 10% to 15% and 12.5% respectively. In addition, it is proposed that securities held for a period of more than 2 years and less than 4 years be also taxed, though, at a reduced rate of 7.5%.

b. Increasing Cost of Non-Compliance with Tax Laws:

In order to promote tax culture, to discourage non-compliance with tax laws and to address the concerns of citizens paying due taxes and resultantly having higher cost of doing business than tax evaders, a distinction was created between a compliant and non-compliant taxpayer by prescribing higher withholding tax rates for those not filing their Returns through Budget 2014-15. That measure has shown good results. Continuing with the same policy, the regime of different rates for Filer and Non-Filer is proposed to be extended on certain other transactions. Accordingly, it is proposed that the rate of tax in the case of Non-filers be increased in the case of contractors by 3%, in the case of suppliers by 2% and in case of commission agents by 3%. The rate of tax on non-filer transporters is also proposed to be enhanced by various percentages.  The rates in the case of non-residents may also be revised accordingly, to provide a level playing field. Any person can avoid payment of this advance tax by filing of return and can also claim adjustment or refund of this tax by filing return after the payment.

c. Adjustable advance income tax on banking instruments and other modes of transfer for Non-Filers:

The existence of a parallel informal economy is a major policy challenge in Pakistan. The informal sector takes benefit of all the services of state but does not contribute to the revenue required to provide these services. Accordingly it is proposed that adjustable advance income tax at the rate of 0.6% of the amount of transaction may be collected on all banking instruments and other modes of transfer of funds through banks, in the case of persons who do not file Income Tax returns. I would like to reiterate that this provision shall not be applicable on taxpayers.

d. Rationalizing Tax Rates for Various Sources of Banking Companies:

Presently, tax rate of 35% is applicable to banking companies from all sources except income from dividend which is taxed at various rates from 10 to 25% and income from capital gains which is taxed at a rate of 10 and 12.5%. This arrangement discriminates between different sources of income for banks. Accordingly rate differential for different sources is proposed to be removed and income of banks from all sources is proposed to be subjected to income tax @35%.

e. Taxation of Dividend:

The present rate of tax of 10% on dividend income is on the lower side as compared to most other countries. It is proposed that the rate be increased to 12.5%. Consequently, in case of non-filers the rate of tax is proposed to be increased from 15% to 17.5% of which 5% shall continue to be adjustable. For Mutual Funds the existing rate of 10% shall continue.

f. Taxation of Capital Gains from Trading of Futures Contracts:

Capital gains derived from trading of commodity future contracts on Pakistan Mercantile Exchange (PMEX) is not exempt from tax. However, the traders are neither filing their returns nor any withholding tax is applicable on these transactions. It is proposed that advance adjustable income tax at the rate of 0.1% on each transaction may be introduced to be collected on every purchase and sale of futures contract.

g. Domestic Electricity Consumption:

At present, adjustable advance income tax is collected at a rate of 7.5% on domestic electricity bills above Rs 100,000. Due to reduction in electricity prices it is proposed that the threshold be reduced to Rs. 75,000.

h. Renting Out Machinery and Certain Equipments:

At present there is no withholding tax on either use or right to use of commercial, industrial and scientific equipment or on renting out of machinery. For non-residents, 15% final tax is already in place on use or right to use of commercial, industrial and scientific equipment. It is proposed that a 10% withholding tax be imposed on renting out machinery and for use or right to use commercial, scientific or industrial equipment, in case of residents also, and be treated as final tax liability.

i. Dividend from Real Estate Investment Trusts (REIT):

Since at present no special regime for unit holders of REIT has been prescribed it is accordingly proposed that unit holders for REIT be treated at par with the unit holders of Mutual Funds and dividend be subjected to same tax rates.

j. Taxation for Not Distributing Dividend:

The government has taken many measures for encouraging corporatization and several measures have been announced in this budget to encourage investment in corporate sector through stock exchanges. However, such measures will be ineffective if small shareholders do not get return on their investments. In order to protect interest of shareholders and to encourage companies to distribute dividend, it is proposed that in the case of a public company other than a scheduled bank or a modaraba, which does not distribute cash dividends within six months of the end of the tax year or distributes dividends to such an extent that its reserves, after such distribution, are in excess of 100% of its paid up capital, the excess amount may be taxed at the rate of 10%.

k. Revenue for Rehabilitation of Temporarily Displaced Persons:

The terrorism and counter-terrorism efforts have resulted in displacement of hundreds of thousands of people of FATA and Khyber Pakhtunkhwa from their homes. The vulnerable sections of the population, women, children, elderly and sick have suffered the most. The host communities have also taken a toll. The cost of rehabilitation of these displaced persons has been estimated at 80 billion rupees. These direct affectees of the war on terror deserve the full support and facilitation of the Nation. To meet enhanced revenue needs for the rehabilitation of Temporarily Displaced Persons in a dignified and befitting manner, it is proposed to levy a one-time tax on the affluent and rich individuals, association of persons and companies earning income above Rs. 500 million in tax year 2015 at a rate of 4% of income for banking companies and 3% of income for all others. It is expected that the provinces will also contribute their due share in this national cause and the entire receipts from this source shall be utilized for rehabilitation of TDPs.

Relief Measures

l. Reduction in Tax Rate for Companies:

The government has been encouraging corporate culture and documentation in the economy and has introduced a policy of reducing corporate income tax rate by 1% annually from 35% until the tax rate is reduced to 30%. Accordingly the rate was reduced to 33% in the preceding year. It is proposed that, continuing with the policy, the rate may further be reduced to 32% for Tax Year 2016. This will encourage businesses to join the formal sector.

m. Exemption to Electricity Transmission Projects:

Energy is critical for the economic growth. In order to attract Private Sector Investment in electricity Transmission Line Projects, it is proposed to exempt profits and gains derived from Transmission Line Projects for a period of 10 years, provided that the project is set up by 30th June, 2018.

n. Tax Credit for new investment in shares:

The government wants to encourage saving and investment in documented sectors by the general public. At present, an individual is entitled to tax credit for an investment made in shares offered by public company listed on stock exchange subject to a maximum of 1 million rupees. To encourage investment in new companies quoted on stock exchange, it is proposed that this limit be enhanced to 1.5 million.

o. Tax Credit for Enlistment:

At present, a 15% tax credit is available to a company, if it opts for enlistment in any registered stock exchange in Pakistan. To encourage enlisting of companies on stock exchange, it is proposed that the credit be enhanced to 20%.

p. Reduction in Withholding Tax On Token Tax and Transfer of Vehicles:

(i). On demand of the Provincial Governments, the rates of adjustable advance Income Tax collected with Token Tax is proposed to be reduced by around 20 to 25% in the case of Income Tax Returns filers.

(ii). The rate of adjustable advance Income Tax collected on transfer of vehicles is proposed to be reduced by around 75% in the case of Income Tax Returns filers and also reduced by around one-third in the case of non-filers.

q. Expanding the Scope of Small Company:

Income Tax Ordinance provides a reduced rate of 25% for taxing the income of a small company as an incentive for corporatization. To make the concession more meaningful the limit of capital at Rs 25 million is proposed to be enhanced to Rs 50 million for qualifying as a small company.

r. Relief to Small Taxpayers:

Salaried taxpayers earning taxable income from Rs 400,000 to Rs 500,000 are chargeable to tax at a rate of 5%. To provide relief to this class the rate of tax is proposed to be reduced to 2%. Non-Salaried individual taxpayers and Association of Persons earning taxable income from Rs 400,000 to Rs 500,000 are chargeable to tax at a rate of 10 %. To provide relief to this class the rate of tax is proposed to be reduced to7%.

s. Option to Exporters to Opt Out of the Final Tax Regime:

At present the tax withheld on the export proceed realized by an exporter is the final tax on his income. The exporters are being authorized to opt for assessment under the normal regime and the withheld tax will be treated as minimum tax in such cases.

Customs

Mr. Speaker,

 

4. Now I will present the proposals relating to Customs:

Tariff Reforms

Mr. Speaker,

Last year, on the direction of the Prime Minister, tariff reforms were initiated and the maximum slab of 30% was reduced to 25% which resulted in reduction of tariff slabs from 7 to 6. This year, it is proposed to further reduce the maximum rate from 25% to 20%. It will bring down the number of slabs from 6 to 5. We are also determined to reduce the slabs to 4 by the year 2016.

Revenue Measures relating to Sales Tax and Federal Excise Duty

Mr. Speaker,

5. Now, I present proposals relating to sales tax and federal excise duty.

a. Increase in rates on cigarettes:

Cigarette smoking is a health hazard and for discouraging people from smoking, rates of federal excise duty on cigarettes are proposed to be increased from 58% to 63%. For making informal sector pay due taxes on cigarettes, adjustable FED is proposed to be levied on filter rods @ 0.75 rupees per filter rod.

b. Rates of Further Tax:

For encouraging sales tax registration and penalizing non -compliant businesses, rate of further tax is proposed to be enhanced from 1%to 2%.

c. Mobile phones:

Sales Tax payable on various categories of imported mobile phones is proposed to be increase from 150, 250 and 500 rupees to 300, 500 & 1000 rupees respectively. On the implementation of new rates RD imposed on import of mobile phones will be withdrawn.

d. FED on Aerated Waters:

At present, aerated waters are chargeable to FED at concessionary rate of 9%. It is proposed to increase this rate to 12%.

e. Rationalization of sales tax rate on export oriented sectors.  The applicable rates on export oriented sectors are 2%, 3% and 5% which are far below the standard rate of sales tax @ 17%. Certain irresponsible tax payers are misusing this concessional tax regime.  In order to curb the mal practices it is proposed to rationalize the rates to 3%, 3% and 5%. I would also like to announce that the refund due to the export oriented sectors relating to tax periods till 31st May, 2015 shall be issued by 31st August, 2015. Similarly the value addition tax on commercial imports of these sectors is being reduced from 2% to 1% and 100% sales tax adjustment will also be allowed.

Second Phase of Elimination of SROs

Mr. Speaker,

6. Exemptions and concessions allowed under different concessionary regimes cause huge loss to the national revenue. These exemptions and concessions have been granted over the previous decades prima facie to reduce costs of inputs for industry, incentivize exports, encourage local investors, attract FDI, and provide relief to general public. However, these concessionary regimes in the shape of different SROs created a complex and opaque tax structure hampering trade and breeding malpractices. The scope and impact of these concessions were so pervasive that in 2013 we learnt that the share of non-dutiable imports was 62%. But the general public was simmering under high prices and no benefit on these concessions was passed on to them. These concession benefited special classes and awarded plethora of discretionary powers on Government functionaries.

Mr. Speaker,

7. When our government undertook this gigantic task of analyzing these concessions, it was apprehended that it would be very difficult to touch the widespread and complex concessionary regime in our socio-economic milieu. It goes to the unwavering will and commitment of the Prime Minister of Pakistan that despite presence of strong and influential pressure groups, the process of elimination and curtailment of exemptions has been initiated and in the budget 2014-15, approximately 1/3rd of these concession with a tax cost of Rs105 billion has been withdrawn and rationalized.  This historic achievement has been recognized and appreciated by all sections.

Mr. Speaker,

8. This year, as a 2nd phase of the plan of rationalization of concessionary regime in-depth deliberations and wide-ranging consultations for minimizing the remaining concessions have been conducted. Exemptions and concessions relating to customs, sales tax and income tax amounting to 120 billion rupees are proposed to be withdrawn.

Mr. Speaker,

9. This process of withdrawal of discriminatory SROs will help to further rejuvenate economic activity especially by SMEs and reduce the cost of doing business in the country. The equity in taxes will breed competitiveness and provide a better and reliable environment for local and international investors.

Mr. Speaker,

I would also like to announce that the powers of the FBR to issue exemptions/concessions have been withdrawn and those of the Federal Government have been limited to exceptional circumstances. This reflects our belief in the supremacy of the Parliament.

Tax Reforms Commission

Mr. Speaker,

10. In my last budget speech, I announced formation of Tax Reforms Commission for analyzing and reviewing the entire tax policy and tax administration. Subsequently, the Commission was formally established. It comprises eminent experts in taxation and law and leaders of the business community. The Commission is doing a commendable job in identifying areas of tax structure and administration where policy intervention is required for improving the system. The TRC has submitted its interim report and the final report shall be submitted by July this year.

Mr. Speaker,

11. By the grace of Almighty Allah the economy is out of turbulent waters. The challenge that we have accepted for the next three years of our current tenure is take the economy on a higher trajectory of growth. In order to do so it is important to have a special focus on those areas of economy that can be catalysts in economic growth.  Accordingly, we have decided to give special incentive packages to the Construction, Agriculture, Manufacturing and Employment Generation Sectors. These sectors can be engines of economic growth that can pull other sectors along for the following reasons:

> These sectors form a significant part of national GDP

> These sectors are labour-intensive and employ a large numberof people

> Agriculture has a short gestation period and its effect on the broader economy will be felt sooner.

> Construction Industry has a ripple effect on sixteen other sectors of the economy.

> Manufacturing leads to employment and thus has direct effect on the quality of life of a large number of people.

Mr. Speaker,

12. I will now give the details of the incentive package for Construction sector:

a. Housing Credit:

Mark-up on housing loans obtained by individuals from banks and other institutional lenders for construction or buying a house is proposed to be allowed as a deduction against income up to 50% of taxable income or Rs. 1 million.  b.    Suspension of Minimum Tax on Builders:

The minimum tax on builders leviable for the business of construction and sale of residential and other buildings is proposed to be exempted till 30th June, 2018.

c. Real Estate Investment Trust (REIT) Development Schemes:

We want to encourage the organized and corporatized sector to make investment in housing sector. Accordingly, certain incentives are announced for REIT development schemes:

i. Capital Gains of any person who sells a property to a REIT development scheme formed for the development of housing sector is proposed to be exempt from Income Tax up to 30.6.2018.  ii.   It is also proposed that if a development REIT Scheme for the development of housing sector is set up by 30.6.2018, for the first three years the rate of Income tax chargeable on dividend income of such REIT may be reduced by 50%.

d. Bricks and crushed stone:

In order to reduce cost of construction, it is proposed that supply of bricks and crushed stone may be exempted from Sales Tax for three years up to 30.6.2018.

e. Reduction in customs duty on import of Construction Machinery:

On import of Dump trucks, Super swinger truck conveyors, Mobile canal lining equipment, Transit miners, Concrete placing trucks, Truck mounted cranes and Crane Lorries in used condition by the Construction Companies registered with Pakistan Engineering Council and SECP, the Customs Duty is proposed to be reduced from 30% to 20%.

Mr. Speaker,

13. The following incentives are proposed to be given to employment generating industries:-a.    Employment Credit to Manufacturers:

In order to encourage the companies to generate employment, it is proposed that if a company, being a manufacturer, is set up during next three years and employs more than 50 employees duly registered with Social Security and Employees Old Age Benefit Institution an employment tax credit equal to 1% of the income tax payable for every 50 employees may be provided to the company, subject to a maximum of 10%.

b. Exemption to Greenfield Projects:

Under Prime Minister’s Package exemption was allowed from explaining source of investment for new investment in Greenfield industrial undertakings. On demand of various investors and business community, it is proposed that this exemption be extended up to 30th June, 2017.

c. Import of Solar Panels:

Certain items are only exempted from Sales Tax and Customs Duty on import if they are not locally manufactured. However, import of Solar Panels and certain related components was exempt from this ‘local manufacturing’ condition until 30th June 2015. It is proposed that exemption from Sales Tax and Customs Duty in this manner may be extended for one year to 30th June, 2016.

d. Domestic Production of Solar and Wind Energy Equipment Manufacturing:

At present commercial imports in respect of items for dedicated use for renewable sources of energy such as solar and wind are exempt from withholding tax on import. However, no exemption is available for the domestic manufacturers of solar and wind energy plants and equipments. It is proposed to grant exemption, for 5 years, to industrial undertaking engaged in the manufacturing of equipment, plant and items required to produce solar and wind energy.

e. Concession of Customs Duty for Power Units:

“Local manufacturing” condition is not applicable on import of machinery, equipment and other capital goods for power units valuing US $ 50 million and above. It is proposed that the condition of ‘US $ 50 million and above’ may be replaced with the condition of ‘power units of 25 MW and above’.

Mr. Speaker,

14. Incentives for Agriculture Sector are as follows:

a. Tax Holiday for Agricultural Delivery Chain:

It is proposed that for new industrial undertakings engaged in (i) setting up and operating cold chain facilities, and (ii) setting up and operating warehousing facilities for storage of agriculture produce;

They may be granted Income Tax holiday for three years if they are set up before June 30, 2016.

b. ‘Halal’ Meat Production:

Pakistan’s share in one trillion dollar global halal food market is a pittance. In order to encourage new investments in the halal meat production and to increase the use of modern and state-of-the-art machinery and equipment in this sector, companies which set up ‘halal’ meat production plants and obtain ‘halal’ certification by 31st December 2016 are proposed to be allowed tax exemption from Income Tax for four years from the date of set up.

c. Relief to Rice Mills:

Due to low demand in international market rice mills have suffered huge losses. In order to provide relief to them, it is proposed that Rice Mills may be exempted from minimum tax for the Tax Year 2015.

d. Exemption on Supply of Fish:

Supply of agriculture produce including fresh milk, live chicken birds and eggs is exempt from deduction of withholding tax subject to certain conditions. It is proposed that exemption from withholding tax on supply of agricultural produce may also be extended to supply of fish.

e. Import and Local Supply of Agricultural Machinery and Equipment:

In order to promote farm mechanization and enhance productivity it is proposed that non-adjustable sales tax at reduced rate of 7%, instead of existing rate of 17%, may be charged on the local supply and import of certain agricultural equipment/machinery used in Tillage and seed bed preparation, seeding or planting, irrigation, drainage and agro-chemical application etc.

f. Import of Agricultural Machinery:

At present Customs duty, Sales Tax and withholding tax on import of agricultural machinery in aggregate is 28% to 43%. It is proposed to reduce Customs Duty, Sales Tax and Withholding Income Tax cumulatively to 9% as under:

i. Customs duty from  existing rate of 5-20% to 2%;

ii. Sales Tax from  17% to non-adjustable Sales Tax at 7%; and,

iii. WHT from 6% to 0%

g. Interest Free Loans for Solar Tube Wells:

In order to facilitate the small growers and to reduce heavy expenditure incurred on diesel/electricity tube wells it is proposed to provide interest free loans for setting up new solar tube wells or replacing the existing tube wells with solar tube wells.  It is estimated that the cost of half cusec solar tube well may be up to Rs 1.1 million. Against a deposit of Rs.100,000 the government will provide interest free loans through the commercial Banks. The interest on these loans will be picked up by the government. Under this scheme it is proposed to provide interest free loans for 30,000 tube wells in the next 3 years. All farmers with landholdings up to 12.5 Acres will be eligible to apply for this loan. In case the number of applications in any one year is more than 10,000 the beneficiaries will be selected through transparent balloting. After installing solar tube well, a farmer using diesel engine for five hours a day will save Rs.1660 per day and a farmer using electric pump for five hours a day will save Rs.466 per day in running costs.

Mr. Speaker,

15. The contribution of Aviation Sector in Pakistan is a small fraction of one percent of GDP as compared to share of the sector at 3.4% in the global GDP. Our Government is confident that the following package shall cause a spurt in the growth of this sector.

In this regard a few proposals are presented below :-

a. Exemption from Customs Duty and Sales Tax:

It is proposed that Customs Duty and sales tax in respect of following items used in Aviation Sector may be exempted.

i. Aircraft – Whether imported or leased

ii. Maintenance Kits for Trainer aircraft.

iii. Spare parts for use of aircraft, trainer aircraft and simulator

iv. One time import of Machinery, equipment & tools imported by recognized  Maintenance, Repair & Overhaul company

v. Operational tools, machinery, equipment and furniture & fixtures on one time basis for authorized Greenfield airports

vi. Aviation simulators by recognized airline company

b. Remote Area Routes:

Infrastructure connectivity with major economic hubs is key to economic development of a region. Some areas of the country having great economic potential are however located far from existing major economic routes. In order to open up remote areas through aviation links it is proposed that air routes in Gilgit baltistan, Makran Coastal belt, Azad Jammu and Kashmir, Chitral and FATA be exempted from payment of FED and withholding tax.

Relief Measures for Khyber-Pakhtunkhwa

Mr. Speaker,

16. Last but not the least, let me share with this house some relief measures for Khyber-Pakhtunkhwa.

Mr. Speaker,

As all of us know that the economy of Khyber-Pakhtunkhwa has suffered immensely due to terrorism and efforts to counter it. In order to revive the economy of Khyber-Pakhtunkhwa and to provide relief to the people, the following measures are proposed:

a) Five years Income Tax holiday on all new manufacturing units set up in KP between 1-7-2015 and 30-6-2018. Such units shall also be exempted from payment of turnover tax for five years.

b) To address the demand of traders and to facilitate exports from KP to Afghanistan, exports of perishable goods namely fruits, vegetables, dairy products and meat are proposed to be allowed against Pak currency instead of dollars w.e.f. 1-7-2015.

c) Quota for ghee and vegetable oil under DTRE for export to Afghanistan and Central Asia is proposed to be enhanced three times from 1000 Metric Ton per 90 days to 1000 Metric Ton per month.

d) The legacy issues regarding minimum tax payable on turnover under the previous KP package available for tax years 2010 to 2012 shall also be resolved. Minimum Income Tax is leviable under the existing law however, to address the hardship of KP businessmen suitable amendments shall be made.

e) The pending issue of Sales Tax refunds payable as a result of the above mentioned package shall be resolved latest by 30th September, 2015.

Mr Speaker,

f) I would also like to share with this August House a breakthrough in trade with Central Asia. Exporters from KP in particular and other exporters in general were facing hardship because of the requirement of financial guarantees equivalent to 110% of the Custom duty by Afghanistan on our exports to Central Asia. Moreover, our exporters had to pay US $ 100 on each 25 tons of export transiting through Afghanistan to Central Asia. I am happy to announce that during the recent visit of the Prime Minister of Pakistan to Kabul, the issue was taken up with the Afghan side and Economic Adviser to Afghan President informed me on telephone on 31st May, 2015 that they have decided to abolish these measures.  This decision will boost our exports to Central Asian countries, and will reduce the cost for exporters.

PART- III

Pay and Allowances for Government Employees

1. As you know, we are a resource poor economy where demands are many and resources are limited. The present government is committed to reduce non-productive expenditure to achieve greater availability of fiscal space for development spending. This year inflation has substantially come down and there is a trend of price stability.

However, the government is fully cognizant of low compensation level of government employees and pensioners. As per past practice, the Government had constituted a committee which submitted its recommendation keeping in the inflation and fiscal constraints. The government has taken following decisions in this regard:-

1) 7.5% Ad-hoc Relief Allowance on running basic pay will be allowed to all federal government employees with effect from 1st July 2015, as against the recommendation of 5% increase by the Committee.

2) Ad-hoc increases of 2011 and 2012 will be merged in the pay scales as recommended by the Committee.

3) Medical Allowances of all government employees is being enhanced by 25%.

4) One premature increment will be allowed to employees of grade 5 with effect from 1st July 2015. Last year pre-mature increment was allowed to employees of grade 1-4.

5) A uniform Ph.D. Allowance of Rs.10,000 per month will be allowed to Ph.D./D.Sc. degree holders working under federal government with effect from 1st July 2015. This will replace the existing Science and Technology Allowance of Rs.7,500 per month and Ph.D. Allowance of Rs.2,250 per month.

6) The rates of special pay to Senior Private Secretaries, Private Secretaries and Assistant Private Secretaries are being increased by 100%.

7) The rate of orderly allowance and special additional pension is also being increased to Rs.12,000 per month.

8) For the welfare of the labor class and in line with increase in pay of government employees, the minimum wage rate is also being increased from Rs.12,000 to Rs.13,000 per month.

Pensioners

2. Following relief measures are being announced for the pensioners;-

(1) 7.5% increase in net pension to all pensioners of federal government with effect from 1st July 2015.

(2) Medical Allowances of pensioners is being enhanced by 25%.

(3) Extension of family pension to widowed/divorced daughter for life or till re-marriage with effect from July 1, 2015.

(4) Revival of policy for restoration of surrendered portion of commuted value of pension after outliving the prescribed period.

(5) Upper limit of investment in Bahbood Saving Scheme of National Savings by the pensioners and senior citizens is being enhanced from Rs.3 million to Rs.4 million.

3.Additional financial impact of the proposed increase in pay, pension and allowances is estimated at Rs.46 billion/annum.

Support for Widows of Victims of Suicidal Attacks

Mr. Speaker

4. Our nation has sustained great losses due to suicide attacks.

Many families have seen their loved ones sacrificing lives and their hardships have increased as their bread-earners have gone. To provide relief to the widows of suicide attack victims, the Government has decided that any outstanding loan including markup up to Rs.1 million as on 30-6-2015, obtained by the deceased husband in his own name or in the name of the widow from a bank or financial institution will be borne by the government.  Entitlement to this facility will be applicable to a widow who has not remarried and provides an affidavit that the government has not previously given any compensation on this account and that she has no resources to discharge the loan and markup obligation.

Compensation to Mirani Dam Affectees

Mr. Speaker

5. A tropical cyclone had hit the site of Mirani Dam on 26th June 2007 and heavily damaged houses, orchards and property of the residents in its vicinity. The issue of compensation against these damages has not been given due attention in the past. In order to provide relief to the affectees, Prime Minister Muhammad Nawaz Sharif has decided that Federal Government and Balochistan Government will jointly compensate for the damages to the tune of Rs.3.5 billion.

Concluding Remarks

Mr. Speaker

6. In the backdrop of economic performance in the last two years, I have presented the Budget 2015-16. After achieving 2 of the 3 objectives set in June 2013, namely prevention of default and stabilization of the economy, we are now embarking on the path of promoting inclusive growth.

7. Federal PSDP of Rs.700 billion and provincial investments of Rs.814 billion will take public sector development spending to Rs.1514 billion, which is nearly 5% of GDP. Together with investments in private sector, including under CPEC (other than those included in the PSDP), the investment to GDP ratio will rise to the target of 16.5% from 13.5% registered in the current year.

8. This investment will spur growth that will create job opportunities for our youth. Both through employment effect of this investment as well as poverty alleviation programs undertaken by the Government people will be lifted from poverty. The public investments in infrastructure, particularly in water, power, highways and railways, will have secondary effects both on growth and employment as new opportunities will emerge and cost of doing business will decline.

9. We are doing so on the back of a stable economy. We are following a serious program of reforms in all sectors of the economy aimed at removing distortions, inefficiencies, enhancing regulatory oversight and encouraging competitive markets.

10. We are confident that Pakistan has a bright future. We are devoting energies to actualize the true potential of our people, which is second to none. All that is needed is an environment of merit, transparency, sincerity and sacrifice for the nation, which is what we are committed to. As I said last year, Prime Minister Nawaz Sharif believes in the destiny of this nation and he is determined to lead the country toward this destiny through tireless devotion, sagacity and service to the people.

11. This destiny was recognized by none other than the father of the nation, Quid-e-Azam Mohammad Ali Jinnah, who said, while addressing a mammoth rally at University Stadium at Lahore on 30th October 1947:

“Do your duty and have faith in God. There is no power on earth that can undo Pakistan. It has come to stay. Our deeds are proving to the world that we are in the right and I can assure you that the sympathies of the world, particularly of the Islamic countries, are with you. We in turn are grateful to every nation who has stretched out to us its hand of help and friendliness.”

12. The Quaid was fully aware of the latent potentialities of our people. He had the foresight to see that Pakistan has come to stay.  But the man who gave the vision of Pakistan had done so much earlier. It was such a destiny he also recognized when he said:

13. I end my speech with the prayer that may Allah enable us to realize the hidden potentialities of this nation. Aameen.

14. Pakistan Paindabad.

Regards,

Umconcept

 

Tags: , , ,

Pakistan Federal Budget 2013-14 Highlights and Details

Federal Budget 2013-14

Following is the text of the Federal Budget 2013-14 speech of Finance Minister Ishaq Dar delivered in the National Assembly on Wednesday.12-06-2013

Bismillahir-Rehmanir-Rahim

PART-I

Mr. Speaker,

Mr. Speaker,

1. As I rise to present the first budget of the newly elected government I want to thank Allah (SWT) for bestowing this singular honor on me. It is not a mere occasion of presenting a budget. It is marking a major transition in the country, where one elected government has completed its full term and after holding the general elections, transition to a new democratic government is being peacefully accomplished. The nation should be proud of the fact that this one step is a leap forward in establishing a democratic polity in the country.

2. As the Prime Minister, in his address to the nation has said, a new beginning in Pakistan is about to start. He has given the message of HOPE and OPTIMISM. He has declared that Pakistanis are second to none and that our destiny is nothing but progress. He will lead the nationto a new world, where Pakistan will regain its lost status in the comity of nations, reassert its due respect and identity in the world and elicit due reverence and dignity in return.

3. On the economic front he has laid out comprehensive a agenda of reform to reinvigorate the economy, spur growth, maintain price stability, provide jobs to the youth and rebuild the key infrastructure of the country.

Mr. Speaker,

4. My enthusiasm, however, is seriously dampened as I discover that the new government is inheriting a broken economy. From economic growth to prices, from revenues to expenditure, from public debt to circular debt, from monetary expansion to interest rates, from exchange rate to foreign exchange reserves and sustainability of balance of payments, I wish I could identify one single area where their economic management was in the best national interest. Indeed, there has been complete absence of management rather the economy was run on autopilot and its inherent strengths and weaknesses played out at their own without any real contribution of policy. Viewed in this perspective, the verdict of the last elections may be termed as the public accountability of the mismanagement practiced at an unprecedented level by the outgoing government.

Mr. Speaker,

5. I will point out four or five key indicators to allow the members to

appreciate how poorly the economy has performed in the last five years:

(1) The growth rate has averaged less than 3% in the last five years, which is significantly below our potential;

(2) The inflation has averaged around 13%, which is unprecedented in the last four decades;

(3) The exchange rate was around Rs.62/$ and it now stands at about Rs.100/$ depreciating by a whopping 60%;

(4) State Bank Reserves were around $11.1 billion and they are leaving behind $6.3 billion despite having obtained significant support from IMF;

(5) There was virtually no circular debt of mentionable size; today, and after paying about Rs1481 billion in tariff differential subsidies, it is known to all that a gigantic circular debt of more than Rs.500 billion is crippling the power sector and fiscal system of the country.

(6) The average deficit in the last five years was recorded at about 7%, which is unprecedented in country’s recent history.

(7) The public debt stood at Rs.5,602 billion on 31st March 2008, which is now projected to rise to 14,284 billion by 30th June, 2013, implying a 2.5 times increase in country’s indebtedness. Even on the basis of Debt to GDP comparison the ratio rose from 52.6% of GDP to 63.5% representing an increase of nearly 10 percentage points in country’s debt burden. I might add here that the total public debt of Pakistan which accumulated between 1947 and 30th June 1999 was around Rs.3000 billion.

6. These are just a few glimpses of the economic landscape that PML(N) has inherited. I have mentioned them for the sake of setting a benchmark from where we are starting. We are dismayed by this inheritance but not discouraged or disheartened. If any thing, our resolve to put things right has only strengthened after realization of the severity of challenges we are facing. Under the leadership of Mian Muhammad Nawaz Sharif our party is determined to turn the tide and not just restore the health of the economy but take it to new heights by enabling it to realize its full potential.

Mr. Speaker,

7. The budget I have the honor to present today is not a mere balancing of revenues and expenditures of the government. It is the statement of economic policy of the PML (N) government that we will balancing of revenues and expenditures of the government. It is the The budget I have the honor to present today is not a mere pursue during the course of our tenure. It is based on the Manifesto our party announced before it launched its election campaign. In this respect, it is the declaration of our intent to fulfill all promises that we made to the nation while seeking this broad-based mandate the nation has bestowed on Mian Muhammad Nawaz Sharif.

Economic Vision

Mr. Speaker,

8. At the outset, I would like to articulate the economic vision that will be guiding our efforts in rebuilding the economy. It comprises the following elements:

(1) First, we want to build an economy that is not dependent on others except through trade and investment, based on competitive advantage and market considerations. We are a strong nation of nearly 185 million people and a nuclear power. As much as we need to defend our frontiers, we need to protect our economic sovereignty also, which would only be possible when we refuse to live on handouts and foreign goodwill. Self-reliance has to be our real goal, for only then we will earn the needed respect in the ranks of the nations.

(2) Second, the private sector has to be the lynchpin of economic activities, shouldering the largest burden of economic functions. A government too occupied in carrying out business activities that can best be done by the private sector through a market mechanism is indeed a prescription for distorting the entire economic system and creating inequities in its functioning. Of course, markets have to be regulated so that competitive environment is ensured. Indeed, because we were too occupied in managing businesses we have grossly neglected the regulatory role of the government, to the detriment of safeguarding consumers’ interests.

(3) Third, the only areas where government’s presence in economic affairs can be justified is where investments are too large for private sector to undertake and/or markets are unlikely to function for lack of adequate commercial returns even though social returns will be very high, such as in education, health, population welfare and large infrastructure projects. Since social sector functions have been devolved to provinces, and for whom we will make adequate resources available, at the federal level our primary focus would be to radically alter and upgrade the fast depleting physical infrastructure of the country, most notably in the case of power sector where widespread shortages are seriously stifling the growth potential of our economy.

(4) Fourth, all segments of the population must share the burden of resource mobilization for running the government. The culture of exemptions and concessions must end to build a self-reliant economy. By the same token, if for reasons noted earlier, government has to undertake an economic service, full cost of operations must be recovered. Non-recovery of cost, through subsidies and non-payment, may provide temporary relief, but it is an assured prescription for disruptive supplies and unviable operations for the companies providing those services.

(5) Fifth, government must limit itself within the broader limits imposed by the available resources, primarily determined by revenues collected through different taxes. On this account government’s performance generally has been dismal, as it has been incurring expenditures far in excess of our income. I will say more on this later in my speech.

(6) Sixth, we have to protect our weak and poor segments of population. People of this country or for that matter any other nation, are our real strength. The marginalized groups represent a reservoir of potentialities which if realized will change the destiny of any nation. It is in this perspective that we have to treat our poor and weak segments of population with care and inclusion. Such are also the groups most vulnesrable to extremist ideologies if neglected. Building a reliable and accessible social safety net for these peoples is an imperative that we will be committed to fulfill.

9. Even though this is a simple vision we have strayed from this path for a long period of time. In the meanwhile, powerful interest groups have emerged who would like the country to continue to walk along the familiar but distorted path. In our view, we have lost considerable time in failing to give a predictable and stable path to our economy. We should not waste any more time in creating a definite and unmistakable direction for our economy so that investors can make long-term decisions, both domestic and foreign and our identity, inherent in the above vision, is firmly established in the eyes of the world.

10. This budget will unfold the implementation plan for this vision. This vision will not be realized tomorrow rather it is a long journey that we have to travel steadfastly. However, a journey of thousand miles starts with first steps, and that is what, Mr. Speaker, this House will see that in this budget we will be laying the foundations for realization of this vision.

Main Elements of Budget Strategy

Mr. Speaker

11. Let me turn to specific policy measures we are adopting in the present budget to address challenges facing the economy and their solutions:

(1) Reduction of fiscal deficit: At the outset, let me state that the main plank of our budget strategy is to reduce fiscal deficit so that its ill effects that pervade through the entire economy can be avoided. The revised estimate for deficit for points to 6.3% of the GDP. We need to further reduce it but we have to do so gradually and in the medium term we do plan to reduce it to 4% of GDP. 2012-13 is Rs.2024 billion or 8.8% of the GDP and we plan to reduce it to Rs.1651 billion or by nearly 2.5 percentage

(2) Raising Tax Revenues: I will lay down tax policy and specific measures in the second part of my speech.

(3) Arresting Inflationary Pressures: The following measures will help in arresting the inflationary pressures:

i. Reduction in deficit will have salutary effect on inflation.

ii. Regular price monitoring will be undertaken with a view to ensure adequate supplies of all commodities. Extensive networks of Juma and Itwar bazaars all across the country will be established and wherever required imports will be used to ward-off of domestic shortages.

iii. We will be using public savings and cheap foreign borrowings to finance deficit and reduce the burden of debt servicing. New domestic saving schemes will be introduced aimed at enhancing public access to government securities which are presently heavily concentrated amongst the banks and given their high spreads much of the benefits of government borrowings are flowing to banks than to general depositors.

iv. Finally, we will be inducting professional managers in debt management and taking advantage of numerous opportunities to diversify our debts both domestic and international.

v. Elimination of borrowings from State Bank will be pursued vigorously. However, I am at pain to point out that the SBP Act, 1956, which was amended by this parliament in 2012 imposing two important constraints on the government borrowings from the State Bank, which is basically printing of money, has been consistently violated by the government. First, government could borrow from SBP only for a maximum period of 3 months, and at the end of each quarter those borrowings will have to be retired. Second, the then existing stock of debt from the State Bank, some Rs.1400 billion, was to be retired in a period of 8 years. Rather than any retirement, this stock of debt now stands at Rs.2300 billion. We are now faced with this onerous responsibility to retire this debt in 6 years at the rate of nearly Rs.400 billion annually.

(4) Resolving the Energy Crisis: Not withstanding its enormity, PML (N) government is fully committed to solving the energy crisis facing the nation. We have chalked out a program and we are inshallah putting it in operation forthwith. The plan includes the following elements: First, I am pleased to announce that Prime Minister Mian Muhammad Nawaz Sharif has taken an historic decision to settle the entire circular debt in 60 days, so that every available and economically viable source of power could be brought on line. Second, as a result of this, we are confident that the duration of loadshedding in the country will begin to come down. Third, for this monumental effort to have the desired effect on the continued viability of the sector, it is imperative that we must do all that is needed to stop its recurrence in the future. I urge all consumers to pay their bills, for without recovery of cost no service can be provided indefinitely. Fourth, the office of the Federal Adjuster will be reorganized and strengthened so that it will ensure expeditious recovery of arrears of electricity from the provincial governments. Fifth, Prime Minister will soon announce a comprehensive plan to incentivize and encourage further investment in energy projects in Pakistan.

(5) Nandipur Project: I would also like to inform this House that a highly economical power project, Nandipur for 425 MW, which initially had a cost of Rs.23 billion was a victim of criminal negligence and its imported machinery has remained stranded for the last three years for want of clearance of certain documents from government departments. Today its cost has risen to Rs.57 billion. We have taken immediate cognizance of this situation and are making necessary efforts to have the documents released and obtain fresh approval from the competent forums. As soon as these are in place in the next few weeks, work on its reconstruction will start immediately and inshallah shall be completed in 18 months. In the meanwhile, let me make it abundantly clear that all those responsible for inflicting this phenomenal loss on the nation shall be brought to justice.

(6) Reducing un-targeted subsidies: As I noted earlier, we must save country’s finances by relieving it from the burden of un-targeted subsidies. We are conscious of the need for the weaker sections of the population to be helped by the government. Accordingly, any scheme of subsidy, whether in electricity, gas, fertilizer, sugar and wheat must be targeted to reach to those weaker segments. We therefore plan to rationalize the present subsidies and discourage their indiscriminate use and evolve targeting mechanism to ensure that deserving recipients should benefit from them.

(7) Improving Balance of Payments: Our biggest woe at the moment is near absence of foreign resources, critically needed to sustain our balance of payments and provide additional resources for development. Inshallah, we are giving an economic vision and implementing it in this budget that will significantly raise the confidence of our development partners. We will soon sort our issues with IFIs and normal flows will begin to flow in the country. More importantly, we will ensure a transparent auction of 3-G licenses that will fetch about $1,200 million. We will also strive to secure the payment of $800 million from the Etisalat that is due for more than 5 years. On the back of improved relations with IFIs, we will return to international capital markets so that additional resources can be mobilized from this source also. We also plan to reinvigorate the privatization program that will also provide us requisite foreign resource and be a catalyst for revival of foreign investment in the country.

(8) Creating New Jobs: As I have already stated, much of the new jobs will have to be created primarily in the private sector. However, government will also play its part in this regard. In a short while I will give you more details of the public sector development plan. For now, let me say that despite reducing fiscal deficit we are raising the development expenditure from a budgeted Rs.360 billion in the current year to Rs.540 billion which is a significant increase of nearly 50%. The provincial governments will make another investment of about Rs.615 billion taking the total public sector investment to Rs.1,155 billion which is a healthy 4.4% of GDP. Clearly, there is room for further increase in development spending but given the resource constraint we have protected development expenditure and increasing it also as compared to current expenditures. This investment will create numerous jobs in various sectors of the economy and spur other economic activities, which will create further opportunities for gainful pursuits by our people.

(9) Raising Investment for Growth: Our biggest economic challenge is to radically increase the level of investment in the economy. I have already noted some of the steps we are taking to reduce budget deficit, bring down inflation and pave the way for a reduction in the interest rate, all of which will make room for private investment.

(10) Reforming Public Sector Corporations: We are determined to fully reform and restructure public sector corporations so that their bleeding is stopped. At the outset, we have decided to appoint professional managers in all public sector corporations through a competitive and transparent process of recruitment. All such corporations that can be profitably privatized will be put to a credible process of privatization. Finally, where privatization is not a possible option either a management contract will be negotiated or fully independent management will be inducted to run the corporations on pure professional grounds. Alongside, full financial restructuring will be carried out to enable them to run on sound commercial basis.

(11) Protecting the Poor: In its manifesto, the PML (N) has outlined a detailed strategy for social protection. Indeed, I am pleased that in 2008 when PML (N) was part of the federal government for a brief period, as Finance Minister I had designed a project of income support fund. It was a program for supplementing the income of poorest of families on totally apolitical basis with a clear methodology for identifying the target population. However, the purity of the program was compromised and it was also politicized. We owe to our poor families that such a program should continue with appropriate safeguards and should in fact be extended to a larger portion of the target population. I am pleased to announce that the Prime Minister Mian Nawaz Sharif has decided that the Income Support Program will continue and will also be expanded. From Rs.40 billion spent under the program last year, we will be raising its size to Rs.75 billion, which is nearly doubling of the program. However, we will bring significant changes in its design and build an explicit exit strategy for the recipients to ensure that this support does not promote dependency rather it only helps them break out from poverty and be able to find a job. I am also pleased to announce that the amount of Rs.1000 per month under the income support program is increased by 20% to Rs.1200 per month.

Medium-term macroeconomic framework

Mr. Speaker

12. These are immediate challenges and our responses as we tackle them. But our vision requires deeper reflection on the problems of our economy. There has to be a long-term view of enhancing country’s productive capacity. Accordingly, this budget is part of a medium term framework spanning 2013-14 to 2015-16 and hence we have a larger time frame in mind while formulating our economic policy. The key features of this framework are:

(a) GDP growth to gradually rise to 7% by FY 2015-16.

(b) Inflation will be maintained in single digit throughout the medium term.

(c) Investment to GDP ratio will rise to 20% at the end of medium term.

(d) Fiscal deficit to be brought to 4% of GDP by 2015-16.

(e) Pakistan’s foreign exchange reserves will be increased to more than $20 billion at the end of medium term.

13. Evidently, these targets are ambitious but these are imperative for the revival of the economy and quite consistent with its potential. Besides, we have the determination to turn around the destiny of this nation and its for this reason people have given us this mandate.

Development plan

Mr. Speaker

14. Let me now share some of the key initiatives that we are taking in the development budget. I will keep my attention to only those sectors that will contribute most to the economic development.

Water

15. Allah (SWT) has blessed Pakistan with one of the best waterresources in the world. We have also inherited an extensive network of irrigation canals, water courses and barrages and our early leadership had the vision of building such mega projects as Tarbela and Mangla that have enabled us to support our agriculture, so central to our economic life. But unfortunately we have failed to add to such critical projects or maintain these precious assets. To meet the growing needs of water it is imperative that we build new reservoirs and use every cusec of available water for development of energy.

16. It is this vision in view that is reflected in our development plan allocation for the water sector. We are investing Rs.59 billion for the water sector projects that will include such projects as Katchi Canal (Dera Bugti and Nasirabad), Rainee Canal (Ghotki and Sukkur), Kurram Tangi Dam (North Waziristan), Extension of Pat Feeder Canal to Dera Bugti, Gomal Zam Dam (South Waziristan), Ghabir Dam (Chakwal), completion of Mangla Dam raising, lining of water courses in Sindh and Punjab, flood protection and drainage schemes all over the country.

Power

Mr. Speaker

17. I need not underline the significance of the power sector in Pakistan and what our people are suffering due to widespread shortages. Nothing has consumed the time and energy of PML (N) leadership more than the problem of energy and its immediate resolution. There are some urgent but durable steps we are taking that I have announced in the budget to resolve the central problem behind the energy crisis, namely the circular debt. However, our real concern is to develop additional resources of energy so as to permanently overcome the problem of shortages. The largest amount of resources, accordingly, is being devoted to create more but durable steps we are taking that I have announced in the budget to economical capacity in the country. During the current year a sum of Rs.225 billion will be invested in this sector of which Rs.107 billion will come from the PSDP and the remaining will be mobilized by PEPCO-WAPDA through government support. The projects included in the program include Neelum-Jehlum Hydro Power Project (1000 MW), Diamir-Bhasha Dam and Hydropower Project (4500 MW), Tarbela Fourth Extension Project (1410 MW), Thar Coal Gasification Project (100 W), Chashma Civil Nuclear Power project (600 MW), Two Karachi Nuclear Coastal Power Projects (2200 MW) with Chinese assistance, Keyal Khawar Hydro Project (122 MW), Allai Khawar Hydro Project (122 MW), Combined Cycle Power Projects at Nandipur and Chichiki Malian (950 MW), Upgradation of Guddu Power Project (747 MW gas-based), conversion of oil based power projects to coal at Muzaffargarh and Jamshoro (3,120 MW) and numerous projects to improve the transmission lines, grid-stations and distribution systems.

18. It can be judged that we have a long-term plan to add cheap power to the national grid and substitute the current dependence on fuel oil to cheaper alternatives. The improvements in fuel mix will mean future tariffs will not be rising as fast as they have been in the recent past.

Highways

Mr. Speaker

19. Since the time Mian Nawaz Sharif took the bold decision of building the Islamabad-Lahore Motorway, no comparable project has been undertaken, despite the fact that since its construction the size of the economy has increased manifold and indigenous needs for connectivity are also multiplying. It is with this urgency that we have carefully examined the entire portfolio of national highways and have reprioritized it in accordance with the needs of the country.

20. Both urban and rural populations need communications for their economics. Farmers will not be able to get good prices for their produce nor can urban producers be cost effective in the absence of communication links that can efficiently transport their products to target markets. Indeed, we must treat development of efficient communication as an important instrument of poverty reduction, since a significant number of poor people are disconnected with the places of economic opportunities and remain poor for lack of access to such places.

21. It is amazing that Gwadar Port was constructed and no significant effort was made to provide connectivity with the north even though nearly a decade has passed since its completion. Coastal Highway was made to bring things to Karachi, completely neutralizing the benefits that were supposed to accrue with a new port at Gwadar.

22. We are according top most priority to connect the Gwadar Port to the north by rapidly completing the various sections of Turbat-Basima-Ratodero and other smaller sections of M-8 so that the real benefits of the port will begin to flow to the people. We will also accelerate the work on M4 connecting Faisalabad to Khanewal and Multan. We plan to undertake a fresh initiative to build M-9 linking Karachi-Hyderabad on Public Private Partnership basis and we are confident that we will succeed in executing this project within the shortest possible time. Let me announce the commitment of our government regarding motorways: the entire system of motorways planned by NHA will be completed during the next five years. This network will guarantee vast expansion in domestic trade, significant reduction in cost of transportation of goods from north to south, cheap transport for people to move around in different parts of the country and increased opportunities of tourism in the country.

23. Besides, the motorway network we have opened a preliminary dialogue with the Chinese government for constructing a high quality modern expressway linking Gwadar with Kashgar. This will be the modern equivalent of ancient silk-route. This is a visionary project and will unleash an historic progress in the region and provide a critical opening for Pakistan with our northern neighborhood.

24. Apart from these strategic projects, we are investing in a large number of national highways, bridges, rehabilitation and reconstruction of national roads destroyed by the floods and regional roads for connectivity. A sum of about Rs.73 billion has been kept in the budget for the road sector. Numerous job opportunities will be created while undertaking the above projects.

Railways

Mr. Speaker

25. One of the most unfortunate examples of wasting our inherited infrastructure at the time of Partition can be found in the state in which our railway is found today. Once a most effective, extensive and efficient network of communication is not even a shade of its past. The speed with which the railways’ significance in the transport sector has declined indicates that it is headed for near extinction. This is simply unacceptable. The world over, rail transport is regaining its lost glory as more investments are made and faster trains are built for both passenger and goods transport. What is more, this mode has been declared as environment friendly and hence it should be preferable to vehicular traffic that is degrading our road infrastructure and increases our dependence on fossil fuels.

26. Our railway is the victim of bad governance, low investments in maintenance, induction of new locomotives, upgradation of rolling stocks, replacement and modernization of primitive signaling system, efficient communication network, track maintenance and doubling of the track on mainline. Stagnant tariffs, declining market share in both passenger and goods transport, rapidly falling revenues have all contributed to bringing railway to a point where its pay and pension, of nearly Rs.34 billion, is paid through a subsidy from the government.

27. An inherently commercial and profitable organization today stands in a state of huge losses, countless stores of precious amounts of refused rails, rolling stocks, locomotives and rebuilding factories suffering from low capacity utilization. It is, however, not a poor organization, as it owns priceless lands, the main artery of rail link and large number of branches connecting far flung areas of the country, numerous bridges, countless buildings, factories, historic railway stations and a very large cadre of technical and civil servants. They are highly skilled, but presently they are demoralized and demotivated, as they see no hope for their betterment tomorrow. The real problem, therefore, in a sense, is not lack of resources, but their utterly inefficient utilization. All this can be changed with leadership, vision, commitment and a plan, to be faithfully implemented, that would aim at complete leveraging of railway assets, infrastructure and improving incentives of employees to perform better.

28. We are committed to revive Pakistan Railways and lay the foundation for restoration of its past glory. Minister for Railways is developing a detailed plan for the above purpose, but let me outline the basic features of the agenda we shall pursue:

(a) Through an Act of the Parliament, Pakistan Railways will be converted into a proper corporation, with due security of job and terms and conditions of the employment of the existing employees;

(b) The railway shall be managed by an independent Board to be drawn from amongst the professionals from the fields of public transport, engineering, management, accountancy, finance, law and public administration;

(c) With the approval of the Board and the Federal Government, railway administration will design a policy for public private partnerships for the profitable utilization of all railway assets.

(d) Development funding for railway will be gradually increased for locomotives, doubling of track, addition to rolling stocks, rehabilitation of signaling system and modernization of communication links. Next we are allocating Rs.31 billion for different projects of railway compared to the revised estimate of Rs.20 billion for 2012-13;

(e) Feasibility studies will be completed for linking Pakistan through rail from Gwadar to Afghanistan, on one side, and Gwadar to China, on the other;

(f) Karachi Circular Railway project will be expedited through the help of Government of Japan;

Human Development

Mr. Speaker

29. The most precious resources of any nation are their people. Indeed, it is said that the real development is embodied in the people, no matter how much of its outer manifestation is reflected in physical developments. Accordingly, we must treat expenditures on human an accelerated pace.

30. Incidentally, the three main subjects of human development, namely education, health and population welfare have been devolved to the provinces under the 18th Constitutional Amendment. However, the responsibility for higher education, regulatory responsibilities and international coordination remain with the federal government. I would like to mention the following. Initiatives that will be undertaken for the promotion of this sector:

(a) A sizeable allocation of Rs.18 billion has been made for the Higher Education Commission, which will support development plans of different universities all over the country. It may be noted that on the current side also a hefty allocation of Rs.39 billion is made for HEC. Thus a combined outlay of Rs.57 billion will be made for higher education.

(b) The enrollment in higher education will increase from 1.08 million students in 2012-13 to 1.23 mil

Introduction of Income Support Levy Act

Mr. Speaker,

51. It is incumbent on all of us who are blessed with exceptional favors from Allah (SWT) to contribute to the welfare of those not so fortunate. Many of us who may have earned our assets while working abroad have negligible tax liabilities under the existing laws and double taxation treaties. Yet we must share the burden of helping our weaker segments of population. In order to mobilize additional resources for enhancing the income support program for the poorest families in Pakistan, it is proposed to impose a small levy on such persons. This levy shall apply on net moveable assets of persons on a given date @ of 0.5%. The receipts under this head will be credited to income support program of the government. Voluntary contributions will be also be solicited to mobilize additional resources. Let me admit that I shall be amongst the first ones who will be hit by this levy. According to my estimation, I will have to pay an additional Rs.2.5 million on this count this year, but I will be too happy to make this contribution for the welfare of our poor people.

Sales Tax and Excise Duty

Mr. Speaker,

52. Several measures have been proposed for broadening the bases of sales tax and excise duties for bringing into the tax net those who have remained outside so far. Our policy is that persons who remain unregistered will have to bear a greater burden than those who are registered. These measures are highlighted below.

(1) An additional amount of sales tax of 5% is being imposed through electricity and gas bills of those having commercial or industrial connections but remain unregistered. Once they get registered, it will no longer apply to them.

(2) All taxable supplies made to unregistered persons will Again, once they get registered, they will no longer have include 2% further tax, for encouraging registration. to bear this charge.

(3) The sales tax withholding agents will now withhold the full amount of sales tax on purchases made from such unregistered persons.

(4) Certain important measures are being initiated to enhance the efficiency of the tax machinery and increase its enforcement capacity. These measures are explained here.

(5) To reduce leakage in sectors prone to evasion, the government is planning to initiate electronic monitoring of textile sector. This system will be enhanced and helped to detect and recover billions of rupees from the computerized system, called CREST, which has recently production processes through video links, tax stamps and labels, electronic tracking, etc. Effective monitoring without human intervention will help introduce a transparent, automatic, and error-free way to ensure proper payment of taxes by these sectors.

(6) FBR has already developed a sophisticated computerized system, called CREST, which has recently helped to detect and recover billions of rupees from the textile sector. This system will be enhanced and expanded, so that leakages of revenue in other sectors can also be detected and recovered.

(7) It is also proposed to introduce a simplified and centralized mechanism to block illegal refunds and input tax adjustments, to stop fake and flying invoices, and to prevent bogus registered persons from committing tax frauds.

(8) To ensure proper monitoring of taxable activities, the registration of registered persons will be placed in the jurisdiction where its business premises are located.

(9) In view of serious resource constraint it is imperative that additional resources should be mobilized immediately. Accordingly, it is proposed to raise the standard rate of sales tax from 16% to 17%.

(10) Supplies made under international tenders used to be zero-rated, but were made exempt last year to stop creation of refunds and associated malpractices. However, this measure created a disadvantage for local competitors, as they could no longer claim input tax adjustment. To create a level playing field for both local and foreign competitors for international tenders, it has been decided to remove the disparity and place both local and foreign competitors under the same standard tax regime.

(11) Zero-rating of sales tax on local supplies tends to create distortions and promotes malpractices. But since ordinary people also use many of these zero-rated items, sales tax is not being imposed on them and they are being exempted from sales tax.

(12) It has been decided to expand the list of items in the Third Schedule to the Sales Tax Act. The measures will not only require manufacturers and importers to print retail prices on consumer goods, but also enable the government to capture the tax involved till the retail stage instead of the benefit going to unregistered wholesalers and retailers.

(13) The five export-oriented sectors were enjoying zero-rating on local supplies over the past several years, which has recently been changed to a reduced rate regime. However, even expensive imported goods like branded clothes, leather bags, and sports goods are enjoying the reduced rate of 2%. Some items enjoying the reduced rates have multi-purpose use in other industries, which creates distortions. To remove these problems, finished goods and items having multi-purpose use are being taken out of the reduced rate regime.

(14) In 2010, due to the prevailing situation, a general exemption of duties and taxes was extended to the tribal areas and some districts of Khyber Pakhtoonkhwa. These were supposed to be time-bound exemptions, and the income tax exemption has already expired. However, the notifications for sales tax and federal excise exemptions did not have any expiry clause. The continued exemption is creating a distortion and difficulties for businesses in other regions. It is, therefore, proposed to be withdrawn.

(15) In case of federal excise, manufacturers of edible oil and ghee complained of distortion, as those using locally produced oil or imported oilseeds were not paying any tax. To remove this anomaly, locally produced oil and imported oilseed are being subjected to the similar tax regime as imported edible oil.

(16) Presently, financial services offered by banking and non-banking sectors are subject to federal excise duty. There is no duty if other persons provide the same services. To remove this disparity, it is proposed that federal excise duty at the same rate may be imposed on all such financial services.

(17) At present, imported edible oil is subject to tax. However, canola seed is being freely imported. This is not only a disparity but also hurts the local oil seed production. To regime will be issued shortly. remove this disparity, it has been decided to impose federal excise duty @ 40 paisa per kilogram on imported canola seed.

(18) The Federal excise duty on cigarettes is simplified and re-structured, from three slabs based on a composite formula, to two slabs based on a specific rate.

(19) It is proposed to allow the aerated beverage industry to pay tax on capacity or fixed basis. It would not only facilitate them, but would help them contribute a handsome additional amount to the exchequer. It would eliminate corruption and make the system transparent and clear. It will also encourage the industry to expand. The detailed notification for implementing the new regime will be issued shortly.

Customs:

Mr. Speaker,

53. Let me say that Pakistan’s import regime over the decades has become fraught with a complex system of discriminatory exemptions and concessions. Every year national exchequer suffers a cost of Rs. 100 billion on account of these exemptions. In today’s world of free trade and level playing field this cannot go on. We have to adopt a simple tax and tariff structure by abolishing the culture of SROs.

54. In order to resolve this long protracted issue, a high level committee headed by Chairman, FBR is being constituted. The committee will examine and finalize its report after consulting all the stakeholders and submit its recommendations to the ECC for tariff rationalization and minimization of concessionary regime.

55. Power shortage has become a chronic problem for the whole country. While major initiatives are being taken to address the power generation and supply situation, a major shift towards the use of renewable energy resources is also a need of the time. In this context various measures are being included in the current budget to encourage use of alternate energy resources by simplifying the procedure for duty free import of solar and wind energy machinery and equipment. At the same time, duty on energy saving devices like energy saving tubes, solar water pumps etc. is also being exempted.

56. Despite prevailing economic situation, every possible effort is being made to provide some respite to the suffering poor of Pakistan. Availability of clean water is fundamental right of every Pakistani. In order to address the spread of water borne diseases through use of filtered water, rate of customs duties on water filtration equipment is being reduced.

57. Use of imported POL products as a major source of energy has not only led to high import bill, but has also created a negative environmental impact. Therefore, use of alternate energy efficient Hybrid Electric Vehicles (HEVs) needs to be encouraged. It is, therefore, proposed that HEVs up to 1200cc will be exempt from duties and other taxes. From 1201cc to 1800cc 50% relief from duties and other taxes will be provided and from 1801cc to 2500cc, 25% relief is proposed. No relief will be available for vehicles beyond 2500cc.

58. Betel nuts and betel leaves are injurious to health. In order to discourage their consumption, custom duty on both these items shall be increased.

Mr. Speaker

59. The proposed tax measures are the most important need of the economy. It will help us in reducing fiscal deficit and also reduce our dependence on external resources. Thus this is an important move toward achieving self-reliance.

PART-III

New Programs for Youth

Mr. Speaker

60. One of the key messages Prime Minister had given during election campaign was his commitment to toward the welfare of our youth. Amongst all sections of our population it is our youth that must not be struck despair and despondency. It is in fulfillment of his promises with the youth that following new programs will be launched in next year’s budget:

(1) Prime Minister’s Youth Training Program: Amongst the youth, the most vulnerable group are those who have completed a 16-year degree program but have not been able to find a decent job, mostly for lack of appropriate experience and training. It is the most cherished desire of the Prime Minister that the government must handhold this group of highly educated youth to inspire confidence and assurance in their lives. Accordingly, he has directed that a comprehensive scheme be developed for such youth in government offices, corporations, bodies and authorities at all levels. All those completing a 16-year degree program and below the age of 25 years will be eligible for selection under the scheme. A one-year training program will be designed for these graduates during which they will be entitled for a stipend of Rs.10,000 per month. Ministry of Education, Training and Standards for Higher Education will administer the scheme and each applicant will apply on-line and his/her degrees will be verified also on-line by HEC. I am confident that this scheme will provide a useful training to qualified youth nearer their homes and will enable them to fare better in the job market.

(2) Prime Minister’s Youth Skills Development Program: Under this program 25,000 young persons up to the age of 25 and will minimum qualification of middle, will be imparted training in a number of trades across the country. National Vocational and Technical Training Authority (NAVTEC) will manage the program in collaboration with provincial TEVTA authorities. Six months training will be given for which fee will be paid by the government. Emphasis will be placed on graduates to become self-employed. such trades as are in demand abroad or will enable the graduates to become self-employed.

(3) Small Business Loans Scheme: With a view to enable our youth to start their own business, small business loans will be made available through the banking system. Under the scheme loans ranging from Rs.100,000 to Rs.2,000,000 will be available at a mark-up cost of 8%. The remaining cost will be borne by the Government. In the first year of the scheme, 50,000 loans will be offered. The scheme will be strengthened in the light of experience gained in first year of operation.

(4) Prime Minister’s Scheme for Provision of Laptop: To promote access to information and communication technology it has been decided that provision of a laptop for distinguished student pursuing higher education should be made. All students pursuing a degree program from one of the HEC recognized universities or institutions and meeting merit criteria to be developed by HEC would be eligible to get a laptop. HEC will announce the details of the scheme shortly.

(5) Fee Reimbursement Scheme for Less Developed Areas: Under an existing scheme bright students from less developed areas are provided tuition fee support while pursuing higher education at Master’s and Doctorate levels. Presently, it is available to students from Balochistan, FATA, Gilgit-Baltistan. There is no reason why this support should not be expended to other less developed areas such as those of Interior Sindh and Multan, Bahawalpur and D.G. Khan Divisions of South Punjab, which are equally less developed. Accordingly, students from these areas pursuing higher education on merit will also be eligible for tuition fee support.

(6) Prime Minister’s Micro Finance Scheme: To enable our men and women to undertake micro enterprise activities, it is decided to allocate Rs.5 billion to launch a scheme of Qarze-Hassana (loans without mark-up). These will be made available through selected micro finance providers including Akhuwat, NRSP and Provincial RSPs. Fifty percent of the beneficiaries of this scheme will be women.

(7) Prime Minister’s Housing Finance Scheme: Under this scheme, a mortgage facility of Rs. 1.5 million to Rs. 5.0 million will be offered at a mark-up rate of 8%. Fifty thousand people will benefit from this scheme.

Mr. Speaker

Good governance

Public Works Programs for Parliamentarians

61. Before I close budgetary proposals, let me announce a historic decision taken by Mian Muhammad Nawaz Sharif. This relates to the public works programs undertaken on the recommendations of the parliamentarians. There were two programs for this purpose PWP-I and PWP-II. The PWP-I was well structured and was based on equal amount for all parliamentarians with an allocation of Rs.5 billion. This program is being retained. However, the other program had no structure and depended on the discretion of the Prime Minister.

62. This program will be stopped forthwith. Mr. Speaker, this one decision is the forerunner of the new style of governance the Prime Minister will bring to the job to move Pakistan ahead with dignity and honor.

Secret Service Expenditures

63. In recent days the nation has also come to know that in the name of secret service expenditures a long list of ministries and departments have been incurring such expenditures, which are excluded from the requirement of audit. This exclusion from audit was meant for such expenditures incurred by agencies connected with the national security. We have taken immediate cognizance of this matter and yesterday Ministry of Finance has issued necessary instructions for immediate ceasing of such of such expenditures and return of unspent balances. Simultaneously, the allocations for the next year have been cancelled. Henceforth, such secret service expenditures will be made only be agencies connected with national security. Appropriate amendment in law and rules is being made for this purpose.

Discouraging VVIP Culture

64. In 1997, the Prime Minister Mian Muhammad Nawaz Sharif had withdrawn the exemption given to VVIPs for duty and tax-free import of luxury vehicles for personal use. Consequently, in the Import Policy Order 1998, which I had announced, the Entry No 1.15 of the Import-Export Procedure was deleted that allowed imports of such vehicles. However, unfortunately such an exemption was accorded in violation of this provision in 2005. Our government would like to reiterate that this ban on duty and tax-free vehicles will continue without exception.

Austerity Measures

65. We are passing through difficult times and its incumbent on us that we reduce our expenditures as much as possible. For this purpose, we have decided to take the following austerity measures to be applicable in the new fiscal year:

(a) The most pressing need of the government is to not to use the full strength of the Cabinet that is provided in the Constitution, which are 49.

(b) To conserve precious resources, the Prime Minister has decided to start the exercise from his own Office. His office will be lean and mean. Furthermore, he is also applying significant cuts to the budgetary allocations for his office. From the budget of Prime Minister’s Office, against a revised expenditure of Rs.725 million during 2012-13, the budget estimate for 2013-14 is only Rs.396 million showing a decrease of 45%. From the budget of Prime Minister House, excluding salaries and allowances, 44% budget has been cut.

(c) Other than the obligatory expenditures of debt servicing, defense, pay and allowances of civil servants and grants, there will be a 30% cut on all other expenditures in accordance with the announcement of the Prime Minister. This will save Rs.40 billion;

(d) With the exception of operational vehicles of law enforcing agencies and critical development projects, no car will be purchased;

(e) The discretionary grant of federal ministers is removed;

Relief measures for retired government employees

66. Despite austerity drive we are mindful of the difficulties being faced by retired government employees. To mitigate their difficulties it has been decided to increase pensions by 10% from July 1, 2013, with the additional relief to low pensioners, whose minimum pension is increased from Rs.3000 to Rs.5000.

Ramzan Package

67. The Holy month of Ramzan is just around the corner. To ease theThe Holy month of Ramzan is justburden on our people, we are designing a comprehensive plan for providing relief during this month by significant reduction in prices of major kitchen items through the Utility Stores Corporation. An amount of Rs.2 billion has been allocated in the budget for this purpose. Additionally, we are making efforts to.

Concluding Remarks

Mr. Speaker,

68. As I said at the beginning, we have inherited a broken economy but we are determined to face the challenge of its reconstruction squarely. There is no evasive action that we plan to undertake neither is we burying our heads in the sand. Lofty ideals are never achieved by turning your back on the adversities encountered on the way. Under the circumstances, the nation should appreciate that the path we have selected is tortuous but once traversed, it will lead the nation to prosperity and progress that is consistent and in line with the possibilities and potentialities possessed by us.

69. This is the lesson we can learn from our Great Quid Muhammad Ali Jinnah, who under a serious medical condition chose to travel to Dhaka to quell a disenchantment facing the nascent state. While concluding a long but highly inspiring speech before one the most largely attended public meetings on 21 March 1948, the Quid said, and I quote:

Finally, let me appeal to you – keep together, put up with inconveniences, sufferings and sacrifices, for the collective good of our people. No amount of trouble, no amount of hard work or sacrifice contribution is enough for the collective good of your nation and state. It is in that way, that you will build a Pakistan as the fifth largest state in the world, not only in population as it is but also in strength, so that it will command the respect of all the other nations of the world.

70. Curiously, I find that Allama Muhammad Iqbal, who first conceived the idea of Pakistan, had a similar message for us we he formulated this powerful and apt description of our potentialities:

Mr. Speaker,

71. Let’s start our journey on the road identified by Quid-e-Azam and be our Guide and Supporter. Allama Iqbal the two great leaders of Pakistan movement. Allah (SWT) will be our Guide and Supporter.

Regards,

Umconcept

 

Tags: , ,

Budget 2013-14 Highlights

Following are the key highlights of the Budget 2013-14, presented in the National Assembly by Finance Minister Ishaq Dar;

•    Total Budget outlay Rs 3.591 trillion
•    Total revenue target for 2013-14 Rs 3420 billion including share of provinces of Rs 1502 billion
•    PSDP Rs 1155 billion; up by 35.7%
•    Forex reserves to be increased to Rs 20 billion by 2016
•    Fiscal deficit to be reduced to 4% of GDP by 2016
•    Fiscal deficit to be reduced to 6.3% by 2013-14
•    Fiscal deficit of 2012-13 likely to be 8.8%
•    Rs. 2.59 trillion to be collected as taxes
•    Key inflation to be kept in single digit
•    GDP growth be raised to 7%
•    Tax to GDP ratio to be raised to 15% by 2015
•    Investment to GDP ratio to be increased to 20%
•    Program to sell state assets to be revised
•    Professional managers to run state-run firms
•    New saving schemes to be introduced next year
•    GST increased from 16% to 17%
•    3G licenses to be auctioned in July
•    Outstanding amount of US 800 million from Etisalat for sale of PTCL to be recovered
•    Pensions to be increased by 10%. No raise in salaries.
•    Minimum pension raised from Rs 3000 to Rs 5000
•    Tax holiday in Special Economic Zones enhanced from 5 to 10 years.
•    Rs 59 billion allocated for new water reservoirs
•    Rs 225 billion allocated for energy projects
•    Circular debt to be addressed in 60 days
•    Muzaffargarh, Jamshoro power plants to operate on coal; generate 3120 MW
•    Rs 31 billion for Railways restructuring
•    Pakistan Railways to be converted into a corporation
•    Japan to extend support in revival of Circular Railway in Karachi
•    Rs 57 billion for investment on human capital; including higher education, immunization
•    Punjab’s Aashiana Scheme to be expanded all over Pakistan
•    1000 Colonies for low income groups; each with 500 houses
•    Corporate tax to be reduced in 5 years from 35% to 30%
•    Adjustable withholding tax to be imposed on marriages in halls, dramas, entertainment
•    Tax slab on salaries up from 25% on Rs 2.5 million to 35% on Rs 6.5 million
•    Rs 3 billion allocated for Laptop Scheme for HEC recognised institutions
•    PM’s micro finance scheme for soft loans with zero% markup
•    Expenditure of PM Office reduced from Rs 726 million to Rs 396 million
•    Austerity drive to save Rs 40 billion
•    Students with 16 years education to get internship, Rs 10,000 stipend
•    Free 6 months vocational training for up to 25 year youth
•    Tax on Hybrid vehicles reduced by 100% up to 1200cc; 50% on 1200-1800cc; 25% pm 1801-2500cc
•    Number of federal ministries to be reduced to 40
•    Rs 2 billion Ramzan package to be offered at Utility Stores
•    Ban on purchase of new vehicles in government departments
•    BISP to be renamed as Income Support Program; up from Rs 40 billion to Rs 75 billion; stipend increased to Rs 1200
•    Rs 5 billion to be allocated for Qarz-e-Hasna for new business. (APP)

Regards,

Umconcept
 

Tags: ,

Solving our energy crisis with renewables

On Friday the temperature touched 47 degrees Celsius in Lahore, coming close to breaking the all time record for the month of May – and on that day there was massive load shedding in the city, making life miserable for Lahore’s inhabitants. Friday was also when the Chinese Prime Minister Li Keqiang ended his visit to Pakistan after giving the green signal to Nawaz Sharif that his country would cooperate in sharing civil nuclear technology to overcome the energy crisis in Pakistan. Just exactly how is expensive nuclear energy going to solve our energy woes (currently nuclear energy contributes just three per cent to our energy mix)? In fact, most energy experts don’t see a role for nuclear energy on a massive scale in the near future, especially given what happened in Fukushima in Japan recently. Pakistan is facing a massive energy emergency and we still cannot think outside the box.
Nuclear energy is expensive, messy and dangerous. As for our massive coal reserves in Thar, we just don’t have the state of the art technology required to convert the lignite coal (lowest ranked coal) found in Thar into gas. The kind of coal that Thar has is of little use besides conversion to electricity onsite. Open pit mining of the coal would require massive amounts of water, which is already scarce in the Thar Desert. Apparently there is not one single scientific study on record that claims that Thar coal is both technologically and economically viable. Why waste so much money investing in dirty coal when we are blessed with so many other clean and renewable resources like solar, wind and hydro?
Even if our current circular debt is somehow paid off by the next government and everyone starts paying their electricity bills and stops stealing from the grid, we will still have energy shortages in Pakistan given our growing population. Currently, the total power generation capacity in Pakistan is 23,500 megawatts; energy consumption has grown by almost 80 per cent in the last 15 years. The Water and Power Development Authority (WAPDA) forecasts the country’s electricity demand will increase to around 40,000 megawatts by 2020.
We are also currently relying on expensive imported furnace oil to run our power plants (oil amounts to 32 per cent of the energy mix). What we need is to turn to alternative energy sources like solar, wind, hydro and biomass instead of relying on fossil fuels. Currently all developing countries are facing energy issues in the face of global oil problems and price fluctuations. Dr Tariq Banuri, who founded the Sustainable Development Policy Institute (SDPI) in Islamabad before working at the UN headquarters in New York, has been emphasising the need for an “energy revolution for economic development” in Pakistan for years now. He has been warning the government on his regular trips back to the country that: “in future, non-renewable energy will become costly and unpredictable. Even current energy costs are too high for poor people in Pakistan”.
On one of his trips back, he had stated that “Pakistan needs affordable – Target $1 per Watt – and predictable energy. Current options are limited and expensive”. He called upon Pakistan to identify and develop affordable and predictable options, like renewable energy from solar, wind, and biomass. This was a couple of years ago and today, the solar panel cost in the country that was once 5 dollars a watt has come down to less than 1 dollar a watt. Internationally, prices for solar panels have come crashing down according to Arif Alauddin, who was until recently the head of the government’s Alternative Energy Development Board in Pakistan. He says that since Pakistan falls under the Sun Belt, there is a vast potential for solar energy in Pakistan.
“The cost of solar panels has dropped 80 per cent in the last five years. The government has also removed all import duties on solar panels. I think there is a perception in Pakistan that we are not doing much in solar energy but we actually are. In 2008 we were importing less than a quarter of a megawatt in solar energy and this year’s imports are close to 20 megawatts. This has been achieved without any government subsidy or direct assistance or support,” explains Alauddin. All over the country, the UPS (Uninterrupted Power Supply) systems are failing due to the massive load shedding which will not allow the batteries to recharge from the grid (the batteries need at least three to four hours of electricity to fully charge). Hence people are installing solar panels in their homes to light up their rooms and run their fans (these solar panels also run with batteries but you just need to add a converter). Sales this year are three times as much as last year and there are as many as 146 vendors in the country. Alauddin says, “We endorsed certified panels (certified by Germany) which are close to one dollar per watt as opposed to those half the price.”

According to him, with Chinese help, 1000 megawatts of solar energy will soon be added to the national grid. This will come mostly from the Cholistan Desert, where solar powered IPP’s are ready to sell power if they get the right rate from NEPRA (National Electric Power Regulatory Authority). “The solar on-grid megawatts projects are lined up and waiting for NEPRA to give a tariff. They need to know at what price to sell electricity to the Government of Pakistan.”

NEPRA was supposed to give the rate in February this year, but they have delayed the decision – perhaps they are waiting for the new government to form and a new chairman to be appointed.

There is also vast potential for wind power in Pakistan – experts say that in the Balochistan and Sindh provinces, sufficient wind exists to power every off grid coastal village in the country. Unlike in neighboring countries, the national grid is quite extensive in Pakistan, except for vast stretches of Balochistan. There also exists a wind corridor between Gharo and Keti Bunder that alone could produce between 40,000 and 50,000 megawatts of electricity. Work has already started on wind farms in this corridor and according to Alauddin, two plants have already been installed, producing 106 megawatts (one is 50 megawatts while the other is 56 megawatts). “Three more that are 50 megawatts each are under construction, and 11 more are in the pipeline.”

In terms of hydropower potential, there is no doubt that Pakistan has ample possibilities, especially in the North. Pakistan’s total hydropower resources have been estimated at 59,796 megawatts, out of which 41,045 megawatts are so far considered exploitable potential. However, the utilisation of hydropower potential is far from being realised (just 29 per cent of the current energy mix). In fact, a policy framework and package of incentives for private sector hydropower generation projects that was introduced back in 1995 has failed spectacularly. Experts like Arshad Abbasi, who works at SDPI, blame WAPDA, pointing out that: “the World Bank rightly proposed institutional reforms in WAPDA for decentralisation in order to increase efficiency in management.”

While developing our hydropower and wind potential is something we can work towards in the future, what we can do immediately, according to Carl Pope, a well known American environmental expert, who visited Pakistan in January this year, is: 1) Stop wasting natural gas heating water; free it up for industry. Countries like Nepal with far less sunshine than Pakistan meet their domestic and commercial hot water needs with low-tech, low-cost, quick to deploy roof-top solar. 2) Use solar pump/drip irrigation technologies to replace low head grid and diesel powered tube wells, and to bring new riparian areas under irrigation. This will free up electricity for industrial use from agriculture and avoid wasted water. 3) Deploy urban roof-top solar generation wherever there is currently diesel back-up. Note that roof-top solar electricity is already cheaper than diesel and oil originated power.

According to Pope, these strategies focusing on renewable energy “require no outside funding; only modest government policy and infrastructure support.”In his view, “small projects can help in the short term – but they must be done in rapidly growing, scaling numbers… Everyone can be part of the solution.”

Tariq Banuri felt that international support could be mobilised to develop a long-term renewable energy expertise in Pakistan and pointed out that: “China is closing old coal plants and investing in renewable energy. They could partner with low cost labour in Pakistan in these areas. Chinese costs are already lower than elsewhere.” Why couldn’t we have asked the Chinese prime minister to help us with investments in renewable energy?

Regards,

umconcept

 

Tags: , ,

Green energy to solve energy crisis in Pakistan

ISLAMABAD – The prime minister of Pakistan in order to overcome energy shortages has ordered to stop the use of air conditioners in all public office buildings in the country. Moreover to combat heat during summers which sometimes witnesses temperatures above 500 C in many parts of Pakistan, the premier directed all the civil servants to follow a new dress code to facilitate them at their work places.
During last winter season when the temperature dropped to below freezing in Islamabad, the federal secretary for water & power had ordered to close natural gas & electricity heaters in all office buildings to save energy in the country. Moreover she advised public servants to wear heavy clothes so that they feel comfortable during work and may not catch cold. To solve the worst energy crises in Pakistan, Energy Foundation chief has advised the government to use green energy resources like solar, geothermal, wind, water, bio & city waste, which are abundantly available all over the country with capacity to produce more than 200,000 MW of electricity. The use of green energy which is free, clean, environment friendly, renewable and sustainable source could provide low cost reliable electricity to our people in a short period of time. Moreover it will reduce our dependence on imported fossil fuels, like crude oil, furnace oil, diesel oil, petrol & coal required for thermal power plants and shall save billions of dollars every year in the form of imports. Geothermal energy is being used for air-conditioning of buildings in seventy countries of the world. The US Government in order to save energy & protect the environment has provided geothermal energy in most public buildings which was initiated by President Clinton in 1999. Moreover the US Government has decided to install one million geothermal energy air-conditioned systems every year by 2016, in all buildings in the country. The geothermal energy air-conditioned systems do not use any gas, oil or coal and save up to 60% electricity. Moreover, no water is used in the system while millions of gallons of water are wasted everyday in the conventional air-conditioned systems. The people in Islamabad are facing acute shortage of water during summer season and in many sectors they have no water even for drinking. If the air-conditioned plants in Islamabad are operated on geothermal energy we can save the water which could be used for drinking. The geothermal energy air-conditioned system will save utility bills, 100% for gas, up to 60% for electricity and 100 % for water.
                                                                                        Reference:Pakistan Today Thursday, 23 May 2013
Regards,
umconcept
 

Tags: ,

 
%d bloggers like this: