ECC rejects further increase in wheat support price

Updated November 28, 2019

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Newly appointed National Food Security & Research Minister Makhdum Khusro Bakhtyar came up with a proposal to further increase wheat support price to Rs1,400 per 40 kg. — APP/File
Newly appointed National Food Security & Research Minister Makhdum Khusro Bakhtyar came up with a proposal to further increase wheat support price to Rs1,400 per 40 kg. — APP/File

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Wednesday declined proposals from its three members to further increase wheat support price and continued financial assistance to defunct Telephone Industries of Pakistan (TIP).

The meeting presided over by Finance Adviser Dr Abdul Hafeez Shaikh cleared a series of amendments to streamline petroleum exploration and production activities as part of the Ease of Doing Business effort.

It also approved a proposal of the Federal Board of Revenue (FBR) for technical supplementary grant to the tune of Rs30 billion for redemption of equivalent bonds and cheque issued by the FBR Refund Settlement Company Ltd for payment of sales tax refunds.

Informed sources said the newly appointed National Food Security & Research Minister Makhdum Khusro Bakhtyar came up with a proposal to further increase wheat support price to Rs1,400 per 40 kg.

He was not happy with a Rs50 per 40kg increase approved by ECC about two weeks ago because the relevant authorities had worked out production cost at Rs1,350 per 40kg for Punjab — practically no incentive for the grower.

The support prices were revised with a gap of almost four years.

The source said Shaikh and Bakhtyar had divergent arguments on the issue and it was decided to defer the matter for detailed discussions possibly at another ECC meeting on Thursday.

Okays proposal for Rs30bn grant to pay back refunds; declines Rs2.15bn loan request for TIP

Shaikh also did not agree to another proposal from the Ministry of Infor­mation Technology and Telecom­munication for the extension of sovereign guarantee in respect of TIP for a further period of two years from September 16, 2019 to September 15, 2021 and payment of loan amounting to Rs2.150bn, inclusive of mark-up of Rs1.030bn to ensure smooth revival of TIP.

Sources said the adviser questioned the rationale behind financing an industrial unit closed in 2008. Energy Minister Omar Ayub Khan, who also hailed from Haripur where TIP is based, argued that continuation of sovereign guarantee was important to ensure salaries to TIP staff, otherwise there could be political ramifications.

Shaikh believed TIP also had some funds in reserve account which should be utilised for a business model to generate revenues instead of total reliance on public money. He advised Khan to help TIP conduct a proper study on how the assets and reserve money could be used for an income stream.

As discussions on the subject prolonged, Shaikh constituted a seven-member high-level committee headed by Commerce Adviser Abdul Razak Dawood to review the proposal and submit its recommendations to ECC within two weeks.

On another proposal by the Ministry of Information Technology & Telecommunication for exemption of eight per cent minimum income tax for National Telecommunication Corporation (NTC), the ECC constituted a body comprising Minister for Economic Affairs Division Muhammad Hammad Azhar, IT & Telecom Minister Khalid Maqbool Siddiqui, Board of Investment chairman and a representative from FBR to review the proposal and present suitable recommendations to ECC.

The meeting, however, approved amendments to hosts of relevant rules and regulations to facilitate oil and gas exploration and production to foster ease of doing business and encourage investment in the sector.

The approval was granted to amend nearly 18 rules dealing with approvals, extensions, renewals, revocations and other ancillary matters covered under the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013 and their subsequent incorporation in relevant rules governing the upstream petroleum sector.

The Ministry of Energy told the meeting that a careful review of the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013 — undertaken in consultation with the concerned industry, consultants engaged for the purpose and under the guidance of Energy Task Force — had revealed that the rules were unduly stringent and had never been objectively updated to capture the latest regulatory and best business practices.

Under the exercise, it was decided to amend the rules to incorporate clear concept of deemed approval, putting timelines for some proposals and elimination of some approvals as well as replacement of monthly reporting requirements to quarterly basis and flexibility in conditions for extensions and renewals to accommodate various types of circumstances not covered under the existing rules.

Under the ECC decision, the amendments would be notified after formal vetting by the Law Division and would become applicable to the new as well as existing licences and leases.

The holders of such leases would be allowed to opt to adopt the changes through signing of supplemental agreements to Petroleum Concession Agreements (PCAs) or any other instrument to be finalised in consultation with the Law Division.

The ECC also approved incorporation of similar amendments in Pakistan Petroleum (Production) Rules 1949; Pakistan Petroleum (Exploration and Production) Rules 1986; Pakistan Petroleum (Exploration and Production) Rules 2001; and Pakistan Onshore Petroleum (Exploration and Production) Rules, 2009 which would be notified after formal vetting by the Law & Justice Division.

After the said rules have been repealed, a legally tenable way forward would also be worked out in consultation with the above mentioned division.

The ECC further okayed a proposal by Commerce Division for declaration of the erstwhile zero-rated sectors as “Export-Oriented sectors, which include textiles, carpets, leather, sports and surgical goods.”

The revised definition was required to provide a legal cover for the provision of cheaper $6.5 per mmBtu of gas after SRO 1125 was rescinded through this year’s budget to end wide tax exemptions to formerly zero-rated sectors.

The meeting also considered and approved for execution of amendment to the implementation agreements in relation to Thal Nova Power and Thar Energy Ltd.

The ECC in its meeting on Nov 8 had approved a proposal by Power Division for amending the implementation agreements in relation to both firms by increasing the time period from 400 to 490 days for the exercise of government’s right to terminate the two projects as the change did not involve any financial impact either on the govt or the consumers.

Published in Dawn, November 28th, 2019