ECC approves Rs20bn electricity subsidy for exporters till June

Updated Mar 12 2020

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Agrees to fix wheat procurement price at Rs1,400 per 40kg. — AFP/File
Agrees to fix wheat procurement price at Rs1,400 per 40kg. — AFP/File

ISLAMABAD: The government on Wednesday approved Rs20 billion special relief package for export industries and agreed in principle to a Rs1,400 per 40kg support price for wheat procurement involving a total financing of about Rs289bn.

The decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh.

“The ECC approved a proposal by the Power Division for a special relief package of Rs20bn to further continue provision of subsidised electricity until June to five export-oriented sectors,” said statement issued by the Ministry of Finance after the meeting.

The decision was based on an agreement reached between a ministerial committee and the export-oriented sectors on Feb 26. The ECC also directed that a committee comprising Economic Affairs Minister Hammad Azhar, Energy Minister Omar Ayub Khan and representatives of the Federal Board of Revenue (FBR), Power Division, Law Division and the State Bank of Pakistan for a proper definition of export sector and a mechanism to ensure that public money flows only to the deserving sectors.

The directive came when on an enquiry from Dr Shaikh, Power Secretary Irfan Ali reported that power subsidy was normally provided to the export sector on the certification of the FBR.

Agrees to fix wheat procurement price at Rs1,400 per 40kg

Under the Feb 26 agreement, the zero rated industries including textiles would be provided electricity at an all-inclusive rate of 7.5 cents per unit (Kwh) and gas at $6.5 per unit (million British thermal unit) until June 30. The agreement required immediate withdrawal of electricity bills issued to export sector with backdated effect from January 2019 which had included a series of surcharges, quarterly adjustments and fuel price adjustments. This would be adjusted against the fresh Rs20bn subsidy.

The government had also accepted a demand of the industry to allow import of Liquefied Natural Gas (LNG) directly by the private sector. It was estimated that LNG could be available to industry at about $5.5 per mmBtu through private sector imports compared to $8-10 per mmBtu through the public sector.

Wheat support price

The ECC also discussed in detail the proposal for increase in wheat support price from Rs1,365 per 40kg to Rs1,400 for 2019-20 crop. Based on comments from the participants, Shaikh agreed in principle to fix Rs1,400 per 40 kg support price but linked it to finalisation of a plan in consultation with provinces to ensure stable prices for the public throughout the year with tangible responsibilities to various stakeholders.

Therefore, a dedicated meeting on the subject has been called on Thursday for a detailed plan to keep the flour prices at the lowest possible level throughout the year in view of any increase in support price and incidental charges for supply of the Pakistan Agricultural Storage and Services Corporation (Passco) procured wheat to provinces and allied issues related to procurement of wheat by provinces and the private sector.

It was noted that the Passco had been given the responsibility for procurement of 1.8 million tonnes of wheat at a cost of Rs63bn on behalf of the federal government. Therefore, there should be a clear roadmap as to why the centre would foot the bill and what options it would have in case any stakeholder failed to honour its responsibility.

Also, there should be clear roles for all stakeholders including the provinces as to the provision of incidental charges, gunny bags and release of wheat to the flour mills so as to ensure that problems faced recently due to price hike and shortage are not repeated next year.

Questions were also raised as to why the government should be in the business of wheat procurement and how long this could be sustained in the public sector and why the private sector should not take over the role under a robust monitoring mechanism. Some of the ECC members opined that public sector role in wheat operations was necessitated by entrenched vested interests of certain quarters benefiting at public expense at different levels.

The committee was informed that a total of 8.25m tonnes of wheat would be procured this year at an estimated cost of about Rs289bn. Total estimate for wheat crop was estimated at 27m tonnes.

Of this, Punjab’s wheat procurement bill was estimated at Rs157bn, followed by Passco’s Rs63bn, Sindh’s Rs50bn, KP’s Rs15.75bn and Balochistan’s Rs3.5bn. That would mean that about 60 per cent (16.2m tonnes of wheat) would be retained by the growers while about 10.8m tonnes would be available to the market including 8.25m tonnes by the public sector and remaining 2.55m tonnes by the private sector.

The ECC also approved a proposal by Ministry of Energy for two amendments aimed at providing ease of doing business to upstream petroleum sector. The amendments are related to extension of exploration licences beyond two years by the ECC rather than the minister in charge of Petroleum Division and creation of a new Zone-1 (F) for onshore licensing regime and consequent revision in the Zonal Map.

The ECC also okayed the National Telecommunication Corporation’s revised budget estimates for 2018-19 and 2019-20. The ECC also gave an in principal approval for a proposal for Saudi Riyal 22.5m equity investments abroad by Eastern Products Pvt (Ltd) Pakistan.

Published in Dawn, March 12th, 2020