ISLAMABAD: In its farewell meeting, the Economic Coordination Committee (ECC) of the Cabinet on Wednesday took decisions of far-reaching impact, including the extension of export incentive package for another three years, deregulation of margins for oil marketing companies and dealers as well as relaxed ban on import of CNG kits.
The meeting presided over by Prime Minister Shahid Khaqan Abbasi also expanded the scope of the export package to electronic appliances, transport goods, sports bags and some leather products. The three-year package is estimated to cost a total of Rs195 billion.
The meeting also discussed the impact of the Prime Minister’s Export Package towards enhancement of country’ exports and noted that it has significantly contributed towards the turnaround in exports in FY2018, which had been continuously declining since FY14. It was informed that during July-April 2017-18, the exports have registered an increase of 14 per cent compared to the corresponding period of the previous year.
In order to maintain the growth momentum, improve competitiveness and incentivise investment in export-oriented production, it was decided to continue the package. It was decided to extend Drawback of Local Taxes and Levies (DLTL), on the same terms and conditions, for the commercial and manufacturer exporters for another three years. The package would include existing and new non-textile sectors, allowing them DLTL at the reduced rate.
Still struggling with oil price deregulation
The meeting considered issues in the applicability of SRO 1067(I)/2017 due to limited human resource and capacity constraints of Department of Plant Protection (DPP). It was decided that the import of various food items as listed in the SRO would only be allowed at Karachi Sea Port, and land border posts at Sost, Chaman, Torkham, Taftan, Wagha, Peshawar and Quetta till the required human resource with necessary technical capacity is raised by the DPP for handling inspection work at other ports of the country.
The ECC also deregulated in principle the dealer commission and margin of oil marketing companies (OMCs) on sale of petrol but its implementation would not start immediately owing to system constraints.
Abbasi-led ECC had also deregulated the high speed diesel (HSD) pricing by allowing OMCs and dealers to set their commission on their own in October 2017 but the decision was held in abeyance after the Federal Board of Revenue and other relevant agencies expressed their inability to put in place a system for tax collection and implementation. Deregulation would mean a different price being charged for diesel at every station, and the FBR found it impossible to create a system where they could monitor all of these stations.
The deregulation of margins on petrol has been approved in principle but its implementation would become effective when FBR, Ogra and other agencies are able to work out a mechanism. Therefore, both the diesel and petrol prices would practically remain under the existing arrangement and take effect at a later stage simultaneously since both products are sold together at more than 7,500 retail outlets across the country.
A formal notification allowing dealers and OMCs to set their margins on both petrol and diesel would be issued once the FBR puts in place a tax collection mechanism.
The meeting also discussed the issue of sub-standard CNG cylinders/kits, enforcement of their inspection/testing and flourishing roadside CNG conversions by unskilled workers. The ECC decided to relax the ban on import of CNG cylinders and kits to allow authorised dealers to import them and reduce Customs duties on their imports.
. The ECC also permitted Inter State Gas System Ltd to construct a pipeline connecting the LNG regasification terminal at Somniani, named Bahria Foundation LNG Terminal Project, to Nawabshah. The pipeline would be capable of transporting 700 to 1200mmcfd high pressure regasified LNG which shall further be transported to the north of the country.
A proposal of Petroleum Division for the adjustment of margin on LNG to mitigate higher incidence of tax was accepted by the meeting.
The ECC also allowed Pakistan LNG Ltd (PLL) to use the existing GoP guarantee of $150 million for issuance of Letter of Credit/Standby Letter of Credit Facility. The facility would enable PLL to procure LNG on mid to long-term basis.
In order to incentivise pioneer industries in the country, the ECC also approved amendment in Section 19 of the Customs Act 1969, Sales Tax Act 1990 and Income Tax Ordinance 2001 for providing enabling legislation to extend incentives under the Pioneer Industry Policy.
Published in Dawn, May 31st, 2018