Targeted subsidy


In Pakistan, a significant portion of the population is struggling with poverty and unemployment. The coalition government led by the Pakistan Muslim League (N) has announced to provide petroleum subsidy to low-income groups in order to mitigate the impact of rising fuel prices on their daily lives. While the government’s intentions may be noble, there are several problems associated with subsidies on goods and products in the country, and the recent subsidy on petroleum is likely to be no exception either, and this needs to be addressed on the onset.
First, petroleum subsidies are a burden on the government’s budget. The cost of subsidizing petroleum products has increased significantly over the years, putting a strain on the country’s finances. The money that is being spent on petroleum subsidies could be better utilized in areas such as education, healthcare and infrastructure development.
Secondly, petroleum subsidies are not targeted towards the most vulnerable and needy families. In many cases, the subsidies end up benefiting the middle and upper-middle-class families who can afford to purchase cars and other luxury items that require fuel.
Meanwhile, the poorest segments of the society, who do not own cars and rely on public transportation, do not receive any benefit from these subsidies.
Pakistan is already facing the consequences of climate change, including water scarcity, frequent floods and droughts. By providing petroleumchangegdies, the government is sending a message that it is acceptable to use more fossil fuels, which will only worsen the situation.
While the government’s intentions behind providing petroleum subsidies to low-income families may be well-meaning, the practice is ultimately unsustainable, unfair, and harmful to the environment. Instead of subsidizing fossil fuels, the government should invest in renewable energy and public transportation, which would benefit all segments of the society and help reduce the country’s carbon footprint.
Musadik Malik, the Minister of State for Petroleum, in a briefing carried by this newspaper said the aforementioned relief would be given to those low-income consumers who have motorcycles, rickshaws, 800cc cars or other small cars.
By doing this, the politically embattled government is trying to ensure that the subsidy is only going to go to those who need it.
The hope is that rather than using the resultant savings simply to shore up the budget deficit, the federal government will use it to ensure that petrol on the pump dealer is provided for those who in real sense depend on motorcycles, rickshaws, 800cc cars or other small cars.
Prime Minister Shehbaz Sharif petrol relief package for the poor might increase social welfare to individuals but certainly it would pose both an unnecessary burden on the public budget and would prove economically inefficient if their benefits were not received by the targeted population.