Economic implications of subsidies
•Download as PPTX, PDF•
2 likes•563 views
Subsidies are core part of fiscal policies. There are several kinds of subsidies and each has its own economic implication.
Recommended
More Related Content
Similar to Economic implications of subsidies
Similar to Economic implications of subsidies (20)
More from M Ali Kemal
Recently uploaded
Recently uploaded (20)
Economic implications of subsidies
- 1. Economic Implications of Subsidies M. Ali Kemal
- 2. Definition • Given by Government • Financial aid or support to an economic sector – Institution – Business – Individual • Direct – Cash grants – Interest-free loans • Indirect – Tax Breaks – Insurance – Low-interest loans – Depreciation write-offs – Rent rebates
- 3. Types • Production subsidy • Consumer/consumption subsidy • Export subsidy • Employment subsidy • Tax subsidy • Environmental externalities
- 4. Production Subsidy • Encourages suppliers to increase the output • Production will increase at the same price • Infant Industry Argument • Automobile Industry
- 5. Consumption Subsidy • Directly use by consumers • Food Subsidy • Water Subsidy • Education • Health • Electricity and Gas • Price go down and demand goes up
- 6. Exports Subsidy • Assisting the exporters to export more • Duty Drawback • Exports Financing Scheme • R&D subsidy
- 7. Employment subsidy • Assistance to employer to increase more employment to reduce unemployment • Could be in the form of training subsidy • Employ persons with disability • Problem of wage seeking (illegally) • UK-Employer Subsidy • Australia-Wage Subsidy
- 8. Tax Subsidy • Tax Breaks • Exemptions – Charity • In exports category whosoever spend R&D will get 6 percent tax rebate
- 9. Environment Externalities • Indirect Subsidy • Polluter gets benefit in a way that he is not asked to either pay tax or reduce its production
- 10. Normative Vs Positive • Equity • Support for Poors • Rentseeking • DWL – the cost of subsidy exceeds the benefits of subsidy – Lower efficiency, less competitive. • Opportunity cost of subsidies – The amount spent on subsidy could have been spent on other. Metro Bus – Subsidy
- 11. Political Economy of Subsidies • https://www.iisd.org/GSI/effects-subsidies
- 13. Definition • Subsidies, Grants and Transfers • Financial Support by the Government • 203 billion subsidies • 370.7 billion grants and transfers • Education 64 billion
- 14. Subsidies Subsidy to WAPDA/PEPCO Budget 2013-14 Revised 2013-14 Budget 2014-15 Inter Disco Tariff Differential 165.1 245.1 150 Tariff Differential for Agri Tubewells in Balochistan 3 3 1 Receivables from FATA 12 12 5 Exchange Rate Differentials for USAIDs grant to GENCOs 0.1 0.1 0.1
- 15. Subsidies Subsidy to KESC Budget 2013-14 Revised 2013-14 Budget 2014-15 KESC’s Tariff Differential 55 64 29 KESC’s payable to PSO and PKGCL - 0.317 - Subsidy to USC Budget 2013-14 Revised 2013-14 Budget 2014-15 Ramzan Package 2 2 3 Sale of Sugar 4 4 4
- 16. Subsidies Subsidy to PASSCO Budget 2013-14 Revised 2013-14 Budget 2014-15 Cost differential to sale of wheat (Wheat Support Price) 4 4 4 Wheat Reserved Stock 5 2.5 4
- 17. Subsidies Subsidy to Others Budget 2013-14 Revised 2013-14 Budget 2014-15 Oil Refineries and OMCs 4 - 2 Fauji Fertilzer Bin Qasim Ltd 0.231 - - Sale of wheat in Fata 0.283 0.283 0.293 Sale of Wheat in Gilgit- Baltistan 0.815 0.815 0.850 Sale of Salt in GB 5 5 5
- 18. Grants and Transfers • Special Grants to Provinces • Railways • ZTBL loans • National Internship Program • Aid to GB and AJK • Subsidy for markup on housing loans
- 19. Development Expenditure Outside PSDP Program Ee loan, Budget 2013-14 Revised 2013-14 Budget 2014-15 BISP 75 70.28 97.15 PM schemes Interest free loan, Business loan, fee reimbursement, youth training scheme, etc 25 - 21 Import of urea Fertilizer 30 30 25
- 20. …! • Crop loan insurance scheme • Pakistan Development Fund • SME Business Support Fund • Relief, Rehab, Reconstruction and Security of IDPs • PPAF • Textile Policy • etc