Economic decisions taken by cabinet ignored

[Lahore_Real_Estate]

By Khaleeq Kiani
Monday, 30 Aug, 2010
ISLAMABAD: With the government focussing on political issues, economic decision-making appears to have taken a back seat, leading to non-implementation of key policy initiatives needed to solve severe economic problems.

Background discussions with officials and economic managers suggest that in many cases major policy decisions taken by Prime Minister Yousuf Raza Gilani have either been overturned by his powerful cabinet colleagues or are not being implemented by government agencies.

This happens at a time when most of the budgetary projections have been drastically changed partly because of challenges posed by the devastating floods, but mainly because of delay in implementation of decisions which formed the basis of budgetary targets or their violation.

It may just be a coincidence that those violating collective cabinet decisions draw their strength from the presidential camp.

Some finance ministry officials make a case for appointment of a deputy prime minister who may rein in some ministries and remain focussed on pursuing a prudent economic policy for the sake of long-term political gains of the ruling PPP.

Citing examples, the officials said that national economy was not on the priority list of the current leadership. “As a result, even the decisions that the federal cabinet or the prime minister take after a lot of discussions and debate remain unimplemented,” an official said.

The officials referred to a decision taken at the inter-provincial energy summit presided over by the prime minister in April to eliminate the Rs200 billion circular debt in the energy sector within 45 days. Four months down the road, the debt amount has increased.

“We have paid to the energy companies the entire amount that we were asked to pay but neither the provinces nor the Pakistan Electric Power Company (Pepco) or other companies have honoured the decisions so far,” an official said.

The prime minister was informed at a meeting that instead of clearing the dues the provinces had obtained stay orders from courts. As a result, the Rs30 billion subsidy earmarked for power sector consumers is inadequate to meet Pepco’s cash flow requirements.

The official said the finance ministry had been pleading for urgent decisions for targeted subsidies and improvement in the management of Pepco and its subsidiary companies. “They don’t realise that power sector problems could plunge future generations into a crisis,” another official said. The impact is that Pepco alone continues to drain over Rs350 billion (system losses plus subsidy) of public money every year.

Officials said the energy summit had also decided that all fresh natural gas supplies would be dedicated to the power sector to reduce electricity cost. The power tariff could have been reduced by 10-12 per cent, but Petroleum Minister Syed Naveed Qamar wants fresh supplies from the Kunnar Pasakhi field to be diverted to ‘the industry of his choice’ -- fertiliser.

The petroleum ministry did not move a summary to the Economic Coordination Committee for allocation of gas for the power sector and opposed the step when the power ministry moved a summary.

It allocated half of the gas to gas utilities through a swap arrangement for diversion to the fertiliser industry.

The finance ministry also opposed rental power projects because of foreign exchange constraints to meet their fuel requirements.

Without constituting an independent forum to examine legal and financial implications, the power ministry has decided that six RPPs, whose review had been ordered by the cabinet, would be launched.

Similarly, the provincial governments had promised to keep their development programmes within a total ceiling of Rs425 billion, but Sindh announced a plan Rs50 billion higher than its committed limit, “putting the national fiscal projections into disarray”, an official said.

Giving another example, an official said the prime minister had allowed the petroleum ministry to finalise a liquefied natural gas import contract with the 4Gas and GDF Suez after some re-arrangements and procedural approval from the ECC.

The indecisiveness of the ECC to take the responsibility gave a ‘veto power’ to the law ministry to practically abrogate the deal which will have far-reaching consequences for the economy.