ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet has allowed additional sugar exports of 150,000 tonnes and approved immediate disbursement of Rs60 billion to the state-run Pakistan State Oil (PSO) to address its liquidity challenges and ensure a smooth supply chain.
In a meeting presided over by Finance Minister Ishaq Dar on Tuesday, the committee also decided to discontinue the subsidised supply of regasified liquefied natural gas (RLNG) to two Punjab-based fertiliser plants.
On the recommendation of the Sugar Advisory Board (SAB) led by Food Minister Tariq Bashir Cheema, the ECC allowed the export of a total of 250,000 tonnes of sugar, including 100,000 tonnes already approved on Dec 15.
The export would be allowed to sugar mills on a first-come-first-served basis. The meeting was informed that there were serious variations and inconsistencies in the sugar data provided by the provinces, and the Federal Board of Revenue and the provinces were constantly changing consumption and production figures.
Assents to Rs60bn for PSO to address liquidity challenges; discontinues subsidised RLNG supply to two fertiliser plants in Punjab
The ECC also decided that the total quantity of export should be distributed among provinces based on their installed crushing capacity to be determined by the Pakistan Sugar Mills Association.
The export would also be subject to the condition that proceeds in dollars would be recovered from sugar exporters within 60 days from when the letters of credit are opened. The meeting was informed that the export of 100,000 tonnes allowed on Dec 15 had not materialised yet.
The committee also approved a Rs60bn financial arrangement for PSO to ensure the national fuel supplier can meet its international payment obligations to Qatar and maintain the LNG supply chain.
Under the decision, Rs10bn would be disbursed against the budgeted subsidy while Rs50bn would be arranged through bank financing against a federal government guarantee.
The ECC was told that PSO had to arrange about $450 million every month for LNG imports, but a major part of the gas cost remained stuck with the southern and northern Sui gas companies — SSGC and SNGPL — because of insufficient payments by the power sector and massive gas diversions to heavily subsidised sectors like the export industry, fertiliser and residential.
While PSO had to make payments to LNG suppliers on the 15th of each month, its total receivables had gone beyond Rs620bn. On the other hand, SNGPL owed about Rs385bn to RLNG suppliers, including Rs250bn to PSO and Rs135bn to Pakistan LNG Limited.
The meeting was told that PSO’s funding requirements on account of LNG stood at Rs355bn in November but had jumped to Rs447bn in January and would cross Rs548bn by March — the final winter month.
The ECC rejected a proposal by the industries and food ministries to continue subsidised LNG to two fertiliser plants with a Rs26bn supplementary grant for subsidy.
Instead, the committee decided that the RLNG supply to Fatima and Agritech fertiliser plants in Punjab would be discontinued with effect from Jan 3 midnight amid a gas shortage.
The meeting was told that with no gas availability to these plants in January, the urea buffer stock would halve to about 100,000 tonnes, whereas continuing with subsidised gas was estimated to produce about 65,000 tonnes this month.
The ECC approved a revised mechanism and modalities for transferring funds to Afghanistan under a Rs5bn assistance announced by Pakistan to Afghanistan in October 2021.
Published in Dawn, january 4th, 2023