Living on borrowed money
LAHORE: This government is making intense efforts to improve macroeconomic indicators, but its policies are contradictory. There is no balance, however, as improving one deteriorates the other.
For example, it tries to control prices through administrative efforts and subsidies without raising the bar of governance. Administrative powers could also be used to extract money from commerce and industry, as the bureaucracy at the district level is corrupt to the core.
At the same time, no effort is made to reduce the cost of doing business in the country. When the state steadily increases electricity and gas tariffs, the cost of production increases accordingly.
Another dilemma facing the government is that as it increases electricity and gas tariffs, the amount of subsidies given to five exporting sectors also increases. The under-resourced state must also borrow money for grants.
With corruption in the electricity and energy sectors at its peak, the cost of electricity is also increasing due to the continued depreciation of the rupee. After an increase in electricity and gas tariffs, the amount allocated for energy and electricity subsidies is expected to be significantly increased to honor the government’s commitment to provide electricity and power to fixed subsidized tariffs.
Interestingly, the amount of subsidy given on the borrowed money would increase further if exports increased. If the government does not respect the subsidies, exports would fall.
We sort of make our exporters dependent on subsidies instead of making them efficient by eliminating corruption in all government business. Creating enough jobs to accommodate the millions of workers who enter the labor market each year is the government’s stated goal.
The unemployed migrate by the thousands to the cities. The state has opened langar khannas (free meal outlets) that provide food to the poor at these outlets three times a day.
The urge to look for a job is diluted when you are provided with free food and you are accommodated for free in punnah gahs (shelters). These are purely public calming exercises that are counterproductive for the workforce.
The state could instead organize food for the workers who toil in the small factories. It would be hard work, but at least those who do productive work would benefit instead of the alms seekers who become society’s parasites.
Those who have recommended concessions on electric vehicle imports are most likely formulating auto policy. Can we trust them? We have seen India, Thailand, Malaysia and Turkey emerge as exporters of vehicles and auto parts.
We do not export vehicles and our exports of auto parts are negligible. The latest auto policy introduced competition into the market until this government gave unimaginative concessions to imports of electric vehicles.
Progress is now at a standstill. Investment decisions have been suspended. Now the electric vehicle policy has been tightened again, creating uncertainty in the auto market. The new auto policy is expected to be announced after consultation with the industry. There should be a rock-solid guarantee that the policy would not be changed in the next five years.
The textile policy is still pending. It was to be announced last year and later it was to be announced at the start of this fiscal year. However, there is no sign when the policy will be announced.
There is a standoff between the basic textile sector and the clothing sector. The first demands yarn duties and calls on the government to refrain from imposing regulatory duties on yarn exports. The latter wants yarn imports to be duty free and urges the imposition of regulatory duties on yarn exports. How would the government satisfy both?
It is ironic that the clothing industry emerged through the pioneering efforts of small entrepreneurs and today they lead textile exports, but basic textile entrepreneurs who have stuck to spinning and weaving for 60 years, advise the government on the benefits of added value. clothing and knitwear units. Textile policy should only give incentives to the clothing sector.
Price controls are the Achilles heel of this government. After failing to bring down commodity prices by catching grabbers and manipulators, the government is trying to please the public through subsidies.
He imported sugar which costs Rs 120 per kg but intends to sell it in utility stores at Rs 85 per kg, a subsidy of Rs 35 per kg. Likewise, wheat has been imported at a higher rate and is supplied to mills at subsidized rates. He cut tariffs on edible oil imports, expecting manufacturers to cut prices accordingly, but big brands raised retail prices instead.
The Minister of Finance had the idea to provide many food products at subsidized prices thanks to the Ehsaas cards. It looks like the government is sitting on a gold mine from which it could distribute grants. In reality, we will have to borrow more.