No cheap fuel for the bikes and small cars, says IMF

IMF Show concern on fuel subsidy scheme

The International Monetary Fund (IMF) have raised concern about the cheap fuel scheme, which government was planning to go ahead with. According to IMF representative in Pakistan, the government of Pakistan have not done any consultation about the scheme with IMF. Also IMF have rejected the initial proposal of scheme by Govt of Pakistan.

IMF is however seeking more details on the scheme like costs, terms of operation and details on, how will the scheme identify the potential fraud and how will it cater with it. Also, IMF sees that the more proper way to benefit the eligible social circle will be through the direct cash transfer.

So until the further review, IMF have shown the serious concern about the scheme. They have showed dissatisfaction about Govt of Pakistan not consulting with IMF before announcing the scheme and also they have rejected the initial proposal.

According to the scheme terms and conditions, for the families with overall income lower than Rs. 40,000 PKR per month, petrol had to be 50 Rs. lower than current decided price. However, only subsidy of limited amount had to be given per day. Also the bike owners and car owners with cars up to 800cc engines had to be beneficiary of the scheme. Additionally, to get the subsidy the car and bike had to be registered on the name of person himself, who is getting the fuel. With this clause, lots of car and bike owners who have their ride leased from a bank or third party, become ineligible, as their ride is not registered on their own name.

Process is also not very smooth, if this scheme ever sees the light of the day, the ride owner will need to send an sms on a govt number, which will send back an OTP (One Time Password), only after showing the valid OTP, user will be able to get the fuel.

Also, another trait of scheme, which is not very likable, the govt was planning to put some or all of the weight of subsidy on the people who are not eligible for the scheme. For example, if scheme is for people who have household income of Rs. 40,000, the person with any income above that, like Rs. 41,000 will be paying for the cheap fuel of other person. This is of course not fair to all.

Also, if Govt have to give subsidy to one segment of people, they must figure out a way to finance it themselves, instead of putting the weight on other segment of people. Also the terms govt is thinking about, very few will be eligible for the benefit and all others will be unnecessarily paying high price for getting fuel.

Same is the reason that IMF and many others believe, that direct the direct reimbursement/transfer of subsidy or financial aid amount, is better idea other than messing with already set fuel prices.

Far a lot of time, the current PDM led govt of Pakistan have been struggling to bring back or resume the IMF’s bailout plan in order to get the next one billion plus US Dollars. In bid to do that, govt have already multiple times accepted the IMF terms and increased the fuel, electricity prices and many taxes etc.

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