Federal Govt. Approve the budget for Agriculture sector Rs 2.7tr.

ISLAMABAD - Rejecting the proposal that the federal government collect the agricultural tax, the federal cabinet approved on Friday the Rs 2.7 trillion federal budget for the fiscal year 2011-2012, with a Rs 730 billion allocation for the Public Sector Development Program (PSDP), including provincial allocations. A source told Pakistan Today that after a hectic debate on the proposal tabled by Finance Minister Dr Abdul Hafeez Shaikh that the federal government should collect the agricultural tax following the precedence of former premier Zulfikar Ali Bhuttos government in 1977, the cabinet members - most of whom come from a feudal background - trashed the proposal on the pretext that it was the domain of the provinces and after abolishing the concurrent list, the agricultural tax collection should be left to the provinces. A helpless Shaikh failed to convince the cabinet members on his plea that the federal government should collect the agriculture tax. He only got support from the Muttahida Qaumi Movement (MQM) ministers, who supported the idea to tax the agriculture sector as principally all income generating sectors must be taxed. Prime Minister Yousaf Raza Gilani also said that despite being an agriculturist himself, in his view the agriculture sector should be taxed. However, the decision to tax the sector by the federation was deferred, added the source. The source said the cabinet finally resolved that the agriculture tax could not be levied by the federal government and the provinces should impose it through legislation. The prime minister said the matter would be taken up with the provincial governments in the Council of Common Interest (CCI). Another source said the cabinet also debated a raise in the salaries of government employees as the finance minister was of the opinion that there was no need to raise their salaries; rather the ad-hoc relief given to them in 2008 and 2009 should be merged with their basic salaries.However, Minister for Religious Affairs Khurshid Shah rejected his notion and said that it was time to raise the salaries of the employees as the government was nearing elections. Minister of State for Labour and Manpower Shaikh Waqas Akram supported his argument and said even the current year could prove to be an election year and the government should raise the salaries of the employees, said the source. The source added that State Minister for Finance and Economic Affairs Hina Rabbani Khar, who also has a feudal background, strongly opposed the proposal by Khurshid Shah, saying that government employees numbered only in the thousands, while the focus should be on facilitating the poor to whom the government was already providing subsidy through the Benazir Income Support Programme (BISP).She said further that the employees had already been provided a 50 percent raise in their salaries last year. However, other ministers

including Riaz Pirzada, Farooq Sattar, Babar Ghouri and Manzoor Wattoo supported an increase in salaries. The finance minister gave in and said the government could give a 10 percent raise in the salaries. However, the prime minister intervened and said a 15 percent raise would be just and the cabinet approved his proposal, said the source. The cabinet also approved the merger of previous ad-hoc relief with the basic pay of the employees, added the source. The source said that prime minister also took notice of the strike by the Karachi Electric Supply Company employees and sought a report after MQM ministers raised the issue.Earlier, in his opening remarks, the prime minister said the economy was devastated by unprecedented floods, which had caused damages to the tune of Rs 800 billion according to independent estimates. We saw prolonged power outages which resulted in income losses for households, businesses and industry, impeding GDP (Gross Domestic Product) growth. Deteriorating security situation imposed further costs on the economy in the shape of increased security spending and resettlement of internally displaced persons. Rising inflation due to 45 percent rise in Global Commodities Prices Index and consequent financing costs of fiscal deficit compounded both core inflation and Consumer Price Index (CPI), he added.

SALIENT FEATURES OF BUDGET 2011-12

The total outlay budget 2011-12 is Rs. 2,767 billion. This size is 14.2 percent higher than the size of budget estimates 2010-11. The resource availability during 2011-12 has been estimated at Rs.2,463 billion against Rs.2,256 billion in the budget estimates of 2010-11. Net revenue receipts for 2011-12 have been estimated at Rs.1, 529 billion, indicating an increase of 11 percent over the budget estimates of 2010-11 . The provincial share in federal revenue receipts is estimated at Rs.1,203 billion during 2011-12 which is 16.4 percent higher over the budget estimates of 2010-11 The capital receipts (net) for 2011-12 have been estimated at Rs.396 billion against the budget estimates of Rs.325 billion in 2010-11 indicating an increase of 11 percent. The external receipts in 2011-12 are estimated at Rs.414 billion. This shows a increase of 7.1 percent over the budget estimates for year 2010-11. The overall expenditure during 2011-12 has been estimated at Rs.2,767 billion of which the current expenditure is Rs.2,315 billion and development expenditure at Rs.452 billion. Current expenditures show an increase of less than 1% over the revised estimates of 2010-11, while development expenditure will increase by 64.4 percent in 2011-12 over the revised estimates of 2010-11. The share of current expenditure in total budgetary outlay for 2011-12 is 83.7 percent as compared to 89.7 percent in revised estimates for 2010-11.

 The expenditure on General Public Service (inclusive of debt servicing transfer payments and superannuation allowance) is estimated at Rs.1,660 billion, which is 71.1 percent of the current expenditure. The size of Public Sector Development Programme (PSDP) for 2011-12 is Rs.730 billion while for other development expenditure an amount of Rs.97 billion has been allocated. The PSDP shows an increase of 58 percent over the revised estimates of 2010-11. The provinces have been allocated an amount of Rs.430 billion for budget estimates 2011-12 in their PSDP as against Rs.373 billion in 2010-11. An amount of Rs. 10 billion has been allocated to Earthquake Reconstruction and Rehabilitation Authority (ERRA) in the PSDP 2011-12.