Fuel subsidy misses the point

The government has earmarked Rs75 billion for a three-month fuel subsidy aimed at motorcycle and small-car owners. Under the scheme, two and three-wheeler users get Rs2,000 a month covering 20 litres of petrol, while small-car owners receive Rs3,000 for 30 litres. Business Recorder's opinion piece contends that such relief is modest against petroleum prices, which have climbed 44 to 50 percent over the past year.

The author argues that direct cash transfers to vulnerable households would have worked better, given earlier precedents. A broader option, the piece says, is a levy cut of about Rs16 per litre for three months, which would match the Rs75 billion outlay on roughly 1.5 billion litres of monthly petrol and diesel use. Such a cut would reach every consumer, including the poorest third of the population who cannot afford a bike.

The piece also cites a stronger fiscal position, including Rs500 billion more transferred by the SBP than budgeted and FBR collections on target. It adds that the IMF may not object, since the levy target differs from the primary fiscal balance target. Overall, the writer sees the scheme as closer to the Sasti Roti, Yellow Cab and Laptop schemes, where political motives dominated.