FeaturedNationalVOLUME 17 ISSUE # 16

Relief packages or political exigencies?

With his relief packages, Prime Minister Imran Khan has proved all analysts wrong who were predicting more price hikes after an escalation of the Russia-Ukraine tension. By reducing the prices of petrol and diesel by Rs10 a litre and the power tariff by Rs5 a unit, he has also put the opposition parties on the back-foot, which were threatening to overthrow his government through protest rallies and a no-confidence move. More importantly, it will pacify the coalition partners of the government, which were finding it hard to go to their constituencies and face people after prices have risen to abnormally high levels in the country because of international and domestic reasons.

In his televised address, Prime Minister Imran Khan promised that prices of petrol, diesel and electricity would not be increased until the next federal budget. He also announced a major tax incentive for the information technology and industrial sectors. “I received a summary from the Oil and Gas Regulatory Authority (OGRA) to increase the petrol price by Rs10/litre. Instead of increasing it, I am reducing it by Rs10. We are reducing the electricity tariff by Rs5/unit after which monthly bills will slash down by 20 to 50pc,” he announced, explaining that the government was bearing the subsidy of billions of rupees on both utilities despite difficult economic conditions. For unemployed graduates, he said a Rs30,000/month internship programme was being launched. He also announced 2.6 million educational scholarships for which Rs38 billion would be allocated. Over Rs460 billion would be earmarked for the provision of interest-free loans for youths for start-ups, farmers for agriculture and low-income groups to build their own houses. Besides, the cash stipend has been enhanced from Rs12,000 to Rs14,000 under the Ehsaas programme, which will be provided to eight million deserving families. The PM also announced incentives for the promotion of the Information Technology sector, including 100pc tax exemption for companies and freelancers, 100pc waiver on repatriation of capital and foreign exchange and elimination of capital gains tax for startups. Overseas Pakistanis would enjoy a tax holiday for five years for investment in the country.

On the other hand, all major opposition parties described his announcements as a “futile and desperate last-ditch attempt” to save his government. Reacting to the PM’s address to the nation, they claimed that he had reduced prices under pressure and out of the fear of the opposition’s long march and no-confidence motion. The opposition leaders also termed the relief insufficient keeping in view the prevailing inflation and frequent increase in petroleum and power prices. Calling it a speech by a “terrified and defeated person,” they said it was the PM’s “last address” to the nation.

The prime minister also announced incentives for the industrial sector. The government has promulgated an ordinance to amend the Income Tax Ordinance 2001 to extend the promotion package for the industry and encourage entrepreneurs to invest their undisclosed assets. Under the package, a general amnesty has been given to all persons who will declare assets by paying a general tax rate of five per cent by investment in new industries. There will be complete immunity from a probe into the amount of investment in new industrial units and expansion and modernisation of existing units. The minimum investment for availing the amnesty is Rs50 million and an industrial unit is to be set up as a company. It will be binding on new industrial units to start commercial production on June 30, 2024. Previous beneficiaries of amnesty schemes of 2018 and 2019 are not eligible for it. Moreover, bank loan defaulters in the last three years are also not eligible for the scheme. The sectors which will not be eligible to avail the amnesty scheme are arms and ammunition, explosives, sugar, cigarettes, aerated beverages, flour mills, vegetable ghee and cooking oil manufacturing excluding extraction units. The beneficiaries will declare the amount of funds for investment in a new company and file a statement by Sept 30, 2022. The funds will be used for the purchase or import of plants and machinery for the construction of buildings and structures for the industrial undertaking. The amount declared will be confidential and cannot be disclosed to any authority or court, the Federal Investigation Agency, or National Accountability Bureau by the Federal Board of Revenue. However, there will be no change of ownership of an industrial undertaking company before June 30, 2026. Moreover, there will be no disposal of assets before June 30, 2026. An incentive has also been provided to the companies acquiring “sick industrial units” to revive them. Critics say it is another scheme for the corrupt to legalise their ill-gotten money while the government claims to have launched a vigorous campaign against corruption. However, the Federation of Pakistan Chambers of Commerce and Industry said that the industrial package would attract $3-5 billion investment only in the industrial sector, providing impetus to economic growth and leading Pakistan towards prosperity through industrialisation.

According to the government, it has planned more incentives for different sectors and it will announce them in phases. The government was expected to provide relief to people as it has entered its fourth year in power. However, the opposition’s protest and its planned no-confidence motion against the government have taken the shine off the recent relief packages. The opposition will attempt to take credit for every pro-people step from the government ahead of general elections in 2023. An interesting contest has started again.