ISLAMABAD, Sept 7: The Economic Coordination Committee of the cabinet on Saturday approved a much-awaited Rs2.9 billion bailout package for Pakistan Steel Mills and also gave the go-ahead to export of 500,000 tons of sugar.

Finance Minister Ishaq Dar, who presided over the meeting, later said that the country had received the first instalment of $550 million from the International Monetary Fund. The amount would help build up the dwindling foreign exchange reserves, he added.

The committee, meeting at the Prime Minister’s Office, took about seven hours to reach decisions on some crucial issues, including export of sugar, which will mostly benefit political families, including a number of PML-N leaders who own sugar mills.

As a result of the first loan instalment from the fund, the foreign exchange reserves edged up to $10.4bn, State Bank Governor Yaseen Anwar informed the ECC. The total package approved for Pakistan was $6.64bn.

Mr Dar passed on the responsibility of the increase in inflation to the previous governments’ policies. “Artificial inflation rates were maintained by the previous government by holding back increase in tariffs which should have been passed over by it and the caretaker government,” he said.

The ECC was informed that the country’s wheat stock stood at 7.043 million tons compared to 6.75 million tons in the corresponding period of last year. However, the increase in the stock has not stopped a hike in wheat prices.

Of the PSM bailout package, Rs1.5bn will be released this month and Rs700m each in October and November, including the workers’ salary of two months.

The committee decided that the PSM would remain a public sector enterprise.

However, the government is seeking a strategic partner with a minority stake who can run the management, reflecting a partial privatisation plan.

The chairman of the Board of Investment and the industries ministry were asked to come up with a proposal for a long-term solution to the problem.

The ECC asked the Trading Corporation to purchase 100,000 tons of sugar from the millers to maintain strategic reserves. The current stock is 2.23m tons.

At the same time, it approved an export of 500,000 tons of sugar in October and November.

The meeting agreed on the procedure for allowing the exports -- quota should be allocated on a first come, first served basis by the SBP; export should be made against irrevocable letter of credit or a contract with 25 per cent advance; shipment should be made within 45 days of the registration of contract with the SBP; and non-refundable advance payment to be forfeited in case of non-shipment within 45 days.

However, the permission is subject to the condition that the millers will clear the outstanding dues of growers at the earliest and start crushing sugarcane in Sindh by Nov 1 and Punjab by Nov 15.

The ECC decided to reduce inland subsidy from Rs1.75 to Re1 per kg and the move is likely to bring $480m in foreign exchange.

The ECC decided to constitute a committee headed by federal Minister Ahsan Iqbal to give recommendations within a month for a quantum increase in exports.

The finance minister said value addition, focus on non-conventional items and identifying new markets was necessary for increasing the exports. The total exports have been hovering around $25bn annually for the past five years.

The ECC expressed satisfaction over a 20pc increase in revenue collection by the FBR in July-August 2013 as compared to the corresponding period of last year and expressed the hope that then board would redouble its efforts to achieve the target of Rs2,475bn.

The committee approved a summary of the Yamaha Motorcycle Industries to have qualified under the new entrant policy for the motorcycle industry with new technology, clearing the way for a foreign direct investment of $150m. The group had been striving for four years to seek government clearances on various counts.

The ECC expressed satisfaction that there were 85 days of oil reserves, compared to 29 days recorded last year. It attributed the improvement of clearance of circular debt by the government.