SC verdict: govt in daze to fill Rs122bn gap

ISLAMABAD: The Supreme Court’s interim order to suspend the imposition of carbon surcharge on petroleum products has put the IMF programme of $7.6 billion loan at stake because the government will have to find ways and means to fill the revenue gap of Rs122 billion during the fiscal year 2009-10. Not filling this gap would mean increasing fiscal deficit by almost 0.8 per cent of the GDP, jacking it up to 5.7% from the existing target of 4.9%, which the IMF will not allow at any cost.“It is not possible to stick to the budgetary measures for fiscal 2009-10 if carbon surcharge is not to be collected. So all budgetary targets will have to be revised,” a senior official of the finance ministry said while talking to The News on phone from abroad soon after the announcement of interim order issued by the Supreme Court on Tuesday.When contacted for comments, Minister of State for Finance and Economic Affairs, Hina Rabbani Khar said that obviously the government could not raise question on the order announced by the Supreme Court but at the same time opined that it was an interim order.She admitted that it would put the government in a difficult situation because there are few alternatives to fill this huge gap of Rs122 billion. The options are limited to cutting down on the Public Sector Development Programme (PSDP) or printing more notes, which will be inflationary, she added. Acting Secretary Finance Ayub Tarin along with OGRA high-ups will submit the government viewpoint before the apex court tomorrow (Thursday), she added. She said the expenditures for running the government increased by 3 percent in the budget 2009-10 compared to revised estimates for 2008-09.Defending the imposition of carbon surcharge, she said that the government introduced transparent mechanism and the prices of POL products might have come down next month keeping in view the declining trend in international market. Another finance ministry official was of the view that the IMF considers the fiscal deficit target as sacrosanct and any deviation from the set target might put the whole programme in jeopardy. The $7.6 billion IMF programme has envisaged 4.9 per cent fiscal deficit target for 2009-10 and the suspension of carbon surcharge will create a huge gap of Rs122 billion, which will not be possible to fill either by reducing expenditures or increasing revenues. During the budget-making exercise, the finance ministry officials has expressed apprehensions that the Supreme Court might even block the Petroleum Development Levy (PDL) because the government continued to charge this amount from the masses on the basis of an ordinance promulgated in 1961. “The double taxation such as sales tax as well as PDL was considered the most difficult issue to be defended before the Supreme Court,” said an official. He said the government by imposing fixed carbon surcharge tried to achieve two objectives: to ensure uninterrupted stream of revenue and to achieve parliament’s support. It was the view of the budget-makers that with carbon surcharge becoming part of the budget, the Supreme Court would not block the way of the government to generate Rs122 billion in the fiscal year 2009-10.