ECC approved 6% hike in defense budget and increases for HED, PSM, etc.

According to report, the government has increased the defence budget for the outgoing fiscal year by nearly 6% to over Rs. 1.45 trillion on Friday. The increase is aimed at meeting the needs of the armed forces, including their enhanced salary requirements. The decision to increase the defence budget by another Rs. 80 billion was taken by the Economic Coordination Committee (ECC) of the Cabinet. The committee approved a total of Rs. 182 billion in supplementary grants.

The ECC also approved slapping a 10% regulatory duty on the import of petrol from China to curb the misuse of bilateral free trade agreement. Some oil marketing firms rerouted their imports through China to evade 10% customs duties. The Ministry of Defence had demanded an additional Rs. 80 billion defence budget for “critical shortfalls” in addition to making adjustments in the budget for spending on the Jinnah Naval base, the Naval Base Turbat and multi-functional office building in the headquarters.

Details of the ECC Meeting regarding defense budget

Federal Minister for Finance Miftah Ismail presided over the ECC meeting that approved Rs. 80 billion supplementary budget for the armed forces or to the extent of the actual additional expenditures being incurred. The finance ministry was of the view that the additional spending in fiscal year 2021-22 ending on the 30th of June will be less than Rs. 80 billion. Dor the outgoing fiscal year, the National Assembly had last year approved a Rs. 1.373 trillion defence budget. In July last year, the previous government had given 15% special allowance of the running basic pay to all the ranks of the armed forces, which jacked up the army budget requirements by another Rs38 billion per annum.

With the raise in the spending ceiling, the next fiscal year’s defence budget may also now be higher than the earlier estimated figure of over Rs. 1.55 trillion. In total, the Ministry of Defence got Rs. 153 billion or 11.8% additional money in this fiscal year over the revised budget of the previous year, which is equal to the average inflation rate in Pakistan. The defence spending will be equal to 2.2% of the Gross Domestic Product, excluding expenditures on the armed forces development programme.

Details of the ECC Meeting regarding gas supply and others

The ECC also approved Rs. 621 million for gas supply to the Pakistan Steel Mills (PSM). It was submitted that due to closure of the production activity in Pakistan Steel Mills (PSM), low flame gas of two MMCFD was being supplied to PSM primarily to preserve the Coke Oven Batteries and refractories kilns with an average monthly bill of Rs. 80 million. The ECC revised the cess rates on all types and varieties of tobacco notified by the federal government on the 14th of July.

The Ministry of Communication submitted a summary on funds required for clearing liabilities of the utility companies and agency partners of the Pakistan Post Office Department (PPOD). The collection of utility bills is one of the agency’s functions performed by the PPOD and the amount thus collected was deposited in SBP’s Central Account – 1. Liabilities to the tune of Rs. 62.3 billion have been accumulated till the 31st of March 2022. The Rs. 25 billion had already been approved in April for payment to utility companies.

The ECC after detailed discussion granted permission to release funds amounting to Rs. 37.33 billion for clearing the remaining outstanding liabilities of the utility companies and agency partners by the PPOD after verification of claimed amount by the SBP.

The Ministry of Commerce submitted a summary on levy of regulatory duty on import of Motor Spirit (MS). It was informed that the import of MS was subject to 10% customs duty under the 5th Schedule of the Customs Act, 1969, but it was subject to 0% under China-Pakistan Free Trade Agreement (CPFTA). Those availing the FTA exemption paid zero customs duty while others paid 10% customs duty. The ECC after discussion, in order to address this anomaly, allowed levy of 10% regulatory duty on import of MS. However, where 10% customs duty was paid on import of MS, it would be exempted from levy of regulatory duty.

The ECC also deliberated and approved a summary submitted by the Finance Division on policy for grant of honorarium with direction that the proposal may be redefined as the ECC chairman in his discretion could award additional honorarium to the employees of the federal government.

The ECC approved Rs. 40.5 billion for the Ministry of Commerce for payment claims cleared by the SBP, under previous government’s duty drawbacks schemes (DLTL/LTLD) of textiles and non-textiles sectors. It allowed Rs. 2.2 billion payment to the Federal Directorate of Education. About Rs. 4 billion was given to the Higher Education Commission under the World Bank project – Higher Education Development in Pakistan. The ECC also approved Rs. 15 billion to meet the requirements of the Ministry of Interior.

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