ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet has approved a subsidy of Rs10 per kilogram on export of 650,000 tons of sugar and reduced by 25 per cent the regulatory duty on export of potatoes.

The decisions were made at a meeting held here on Wednesday with Finance Minister Ishaq Dar in the chair. It amended the ECC’s Nov 12 decision to curtail sugar import to 500,000 tons and raised the ceiling to 650,000 tons. The decision will apply to consignments exported by May 16 next year.

It also approved a subsidy of Rs10 per kg on sugar export. The move will cost Rs6.5 billion to the government.

The meeting was informed that ample stocks of sugar (about 1.05 million tons) were available in the country, sufficient to meet domestic requirements on an average monthly consumption of 390,000 tons till March 15.

To improve the liquidity position of the sugar mills, the committee approved inland freight subsidy at the rate of Rs2 per kg and cash subsidy at Rs8 per kg.

“The total amount of subsidy will come to Rs6.5bn and will be equally paid by the centre and the provinces,” an official statement said.

The ECC imposed 20pc regulatory duty on the import of raw and beet sugar to discourage imports because of substantially lower prices in the international market. It fixed minimum price of sugar for export to Afghanistan and Central Asian states at $450 per ton.

The finance minister directed the authorities concerned to immediately issue a notification to this effect and ensure that the mills made timely payments to sugarcane farmers.

The meeting was told that because of higher domestic prices, potato farmers had planted the crop on 10 per cent larger area this year as compared to last year, resulting in a bumper crop and surplus produce.

Sources privy to the meeting said that the finance minister was a little reluctant to lift regulatory duty, fearing it could lead to shortage in the domestic market and price surge as had happened over the past six months when potato prices crossed Rs70 per kg, forcing the ECC to impose regulatory duty on its export.

But a representative of the Ministry of National Food Security and Research told the session that the facilitation of potato export was being sought on the demand of farmers. Surplus produce in the market may create serious problems for the farmers because it will lead to substantial wastage.

Interestingly, the meeting was not told how much surplus produce was expected in the coming season.

While allowing the lifting of duty on exports with consensus, the ECC constituted a committee, comprising secretaries of commerce and food security, to closely monitor the market situation and regularly update the committee. “Interest of the local consumers is also to be kept in view,” Ishaq Dar said.

Power ministry’s proposals accepted

The meeting approved power ministry’s proposal to modify policy framework for on-site private power projects based on interim gas supply to facilitate use of small gas fields in the service area of the Hyderabad Electric Supply Company to replace furnace oil-based plants of Guddu Thermal Power Station.

The Federal Board of Revenue made it clear that no new statutory regulatory order would be issued to facilitate the projects but they might avail benefits under existing provisions.

To secure payment of gas supplies, it was agreed, sellers would provide a bank guarantee or standby letter of credit, equal to mutually agreed period’s payment of fuel component tariff, issued by a scheduled bank.

On the request of the power ministry, the ECC allowed an agreement between Guddu Thermal Power Station (GENCO- II) and M/s Engro for use of 60MMCFD gas from Mari shallow by M/s Engro till Dec 2015 in lieu of gas booster compressors to be installed by Engro for GENCO-II.

The gas originally belonged to fertiliser sector but was allocated to the power plant in 2008 but it failed to utilise it. As a consequence, the field remained non-productive and the power plant was shut down for maintenance.

Last year, the government diverted the gas allocation to Engro which had won some gas quantities through bidding but could not get those due to shortage. As a result, Engro produced about 700,000 tons of fertiliser, resulting in about $1bn saving in lower fertiliser imports and a significant increase in large scale manufacturing last year.

The power ministry had informed the ECC that the Guddu plant would not be ready for gas utilisation until the end of next year. Therefore, the meeting decided to allow continuation of the gas consumption by Engro Fertilizer Company.

The meeting approved public disclosure of “Pakistan Energy Sector Reform -- Quarterly Progress Report of Development Policy Operations”.

Funded by the Asian Development Bank, Japan International Cooperation Agency and World Bank, the project supports the sectoral reform programme and covers tariff management, incentives for private sector participation and improvement of accountability and transparency.

The programme is spread over five years.

Published in Dawn, December 25th, 2014