Govt plans to scrap sugarcane support price
The federal government has decided to do away with the support price mechanism for sugarcane crop and come up with a new pricing system that is linked with the wholesale price of sugar, which is a byproduct of sugarcane.
It arrived at the decision in a cabinet meeting in a bid to appease the protesting farmers, who have been exploited by the influential sugar barons of the country. Even the apex court took notice of the matter as sugar millers were dilly-dallying on the purchase of sugarcane from the growers.
The cabinet meeting was held on March 6 in the wake of recommendations of a committee constituted to address the challenges facing the farmers.
The committee recommended that ‘excessive incentives’ for sugarcane farmers may be rationalised by replacing the current pricing mechanism with a new system that would connect sugarcane price with the wholesale price of sugar in an attempt to ensure a level playing field for all commodities. Sugarcane comprises 80% of the wholesale price of sugar.
Talking to the source, a senior government official said the committee also recommended that sugar millers should pay 75% of the sugarcane price in advance and 5% after a year keeping in view the average wholesale price of sugar.
In 2012, the previous government of Pakistan Peoples Party (PPP) had approved a Cane Purchase Receipt mechanism that would be converted into bank cheques in a bid to save the farmers from exploitation. However, the present Pakistan Muslim League-Nawaz administration failed to implement it.
Even the Ministry of Industries and Production sent a summary in that regard to the cabinet, but it was not approved.
The Cane Purchase Receipt, if converted into bank cheques, would have supported documentation of the agriculture sector and safeguarded interests of the growers.
Cabinet members decided that the sponsoring division should carefully re-examine the proposal in relation to the role of the federal government.
It was surprising for the cabinet members that all key stakeholders including the Ministry of Finance, Ministry of National Food Security and Research, Federal Board of Revenue (FBR), State Bank of Pakistan, cane commissioners of Punjab, Khyber-Pakhtunkhwa and Sindh as well as Kisan Board had backed the system of printing the sugarcane quantity purchased and its price on the receipt. Provinces also endorsed the mechanism.
Instead of approving the receipt mechanism, the PML-N government doled out billions of rupees in export subsidy to the sugar barons.
Total hit to the public exchequer, both federal and provincial, will be at least Rs20.4 billion due to the cost of export subsidy. This is in addition to the benefit of Rs30 billion that the millers will get by claiming a subsidy of Rs20 per kg on the export of 1.5 million tons.
The millers are reportedly paying low prices to the farmers who are receiving Rs140 per 40 kg against the support price of Rs180.
On back of textile & cement’s demand, gross advances enhance
Promising demand from textile and cement sectors have improved gross advances (domestic) to private sector (by 7.3% quarter-on-quarter and 16.4% year-on-year), despite retirements in chemical and pharmaceuticals, according to the latest data released by the State Bank of Pakistan (SBP) on Wednesday.
Banks have mostly invested in short-term Market Treasury Bills (MTBs) while investments in Pakistan International Bonds (PIBs) and Sukuk have declined. Moderate growth in deposits and higher inter-bank borrowings has supported the funding needs of the banks, according to the SBP’s Quarterly Performance Review (QPR) of the banking sector for the quarter ended on December 31, 2017.
As highlighted in the report, improving asset quality, stable liquidity, robust solvency and slow pick-up in private sector advances are the key developments during the fourth quarter (Oct-Dec) of calendar year 2017 (4QCY17). As per trend, asset base of the banking sector has expanded by 4.5% in Q4CY17.
Besides steady performance, the risk profile of the banking sector has remained satisfactory amid moderation in profitability. Asset quality has improved as the non-performing loans (NPLs) to gross loans (infection) ratio, recorded at 8.4% as of end December 2017, has touched the lowest level in a decade.
The banking sector has earned profits (before tax) of Rs266.8 billion during Oct-Dec of 2017 (Return On Assets (ROA) of 1.6% and Return On Equity (ROE) of 19.5%). Encouragingly, Net Interest Income (NII) has improved; thanks to high growth in advances for the last few years.
The Capital Adequacy Ratio (CAR) of the banking sector has improved to 15.8%, which is well above the minimum required CAR of 11.27%.
Gas-based power production surges to over 40pc of energy mix
Pakistan succeeded in achieving a record high power production from environment-friendly sources – gas and re-gasified liquefied natural gas (RLNG) – in February 2018 after launching LNG-based projects and enhancing supply of imported gas in the country.
The regulatory authority reported on Wednesday that combined electricity production from the locally produced gas and imported LNG increased to 43.17% (3,012.94 gigawatt-hours – GWh) of total production in February 2018.
It was 6.6 percentage points higher than the contribution of 36.57% (2,334.48 GWh) in February last year, according to the National Electric Power Regulatory Authority (Nepra).
The jump in power production from clean sources became possible primarily due to the launch of three RLNG-based power projects in Punjab that had cumulative production capacity of 3,600 megawatts.
Breakdown of the data shows Pakistan produced 19.20% (1,340.07 GWh) of electricity from RLNG and 23.97% (1,672.87 GWh) from locally produced gas.
However, electricity production from the imported gas has not proved cheap when compared to the locally produced gas. The tariff for RLNG-based electricity was almost equal to the cost of power produced with the help of expensive furnace oil. The government is gradually abandoning the consumption of furnace oil in power plants.
RLNG-based power tariff was estimated at Rs9.02 per unit, which was almost double the tariff for electricity produced from local gas at Rs4.71 per unit. The tariff for furnace oil-based electricity was Rs10.17 per unit, according to Nepra.
Despite this, the regulator has accepted for hearing a petition seeking reduction in power tariff for the end-consumers by Rs2.19 per unit to Rs5.06 for February 2018.
The proposal for a notable reduction in power tariff was put forward after production from the cheaper, but dirty coal surged in the total energy mix.
February 2018 saw power production from coal at 15.79% (1,102.03 GWh) of the energy mix at a tariff of Rs5.81 per unit. Coal-based production was standing at a meagre 0.07% (4.62 GWh) in February 2017.
The surge in production became possible after two coal-fired power projects of cumulative capacity of over 2,600 megawatts came on line – one in Punjab and the other in Sindh.
As per government’s plans, power production through furnace oil fell to 8.33% (581.39 GWh) in February 2018 compared to 26.28% (1,667.53 GWh) in February 2017. Along with this, production from the most expensive source – diesel – dropped next to zero at 0.01% (0.77 GWh) at Rs14.18 per unit in February 2018 from 0.09% (5.95 GWh) in the same month of previous year.
Production from the cheapest and environment-friendly source – hydel – also fell to 19.44% from 23.40%.
Industrialists express concern over rupee’s freefall
The Islamabad Chamber of Commerce and Industry (ICCI) has expressed great concern over the sharp fall in the rupee’s value against the US dollar as it will trigger a new wave of inflation and create more problems for business and industrial activities in the country.
“The rupee dropped from Rs110 to a dollar to Rs115 in a single day which should be a cause for great concern for the policymakers,” remarked ICCI President Sheikh Amir Waheed in a statement.
He said the rupee had weakened by about 5% in December last year in a similar fashion and another depreciation of over 4.5% in a single day would create new challenges for the economy.
Waheed suggested that instead of withdrawing support for the rupee, the State Bank of Pakistan should make efforts for a stable currency as volatility was disrupting efforts of the private sector for long-term business planning.
“Falling value of the rupee will increase debt burden on the country; depreciation of one rupee causes a jump of Rs60 billion in the public debt burden.”
Seminar: ‘GDP growth to touch 6pc this year’
Adviser to Prime Minister on Finance Miftah Ismail has said that the country will achieve 6% economic growth rate within the current fiscal year, hoping that the pace will translate into increased job opportunities.
While speaking at the two-day World Islamic Finance Forum 2018 that began in Karachi on Monday, he said the government will soon create a post at the Ministry of Finance that would solely deal with the Islamic finance industry, a press release quoted Ismail as saying.
The event’s theme is ‘Expanding the Footprint of Islamic Finance: Innovation, Fintech & Regulations’. He also assured the Islamic finance industry of soon convening a meeting of the Committee for Implementation of the recommendations of the Steering Committee for Promotion of Islamic Banking in Pakistan.
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah Board Chairperson Shaikh Muhammad Taqi Usmani said that despite the country’s humble beginnings in Islamic finance, Pakistanis now hold key positions in Islamic banking in different countries.
While demanding concrete steps to rid the country of ‘Riba’, or usury, he urged the government to immediately establish a section or division at the Ministry of Finance to be headed by an Additional or Joint Secretary level official to resolve problems of the Islamic finance sector.
“Islamic financial institutions have excess liquidity and the government should work on creating avenues for the deployment of these excess funds,” Usmani stated.
AAOIFI Board of Trustees Chairperson Shaikh Ebrahim Bin Khalifa Al Khalifa said that it is heartening to note that Pakistan is striving hard to become another hub of Islamic finance.
“Pakistan has all the basic ingredients [for becoming a hub of Islamic finance] including a massive population of 200 million people, robust banking and finance sector and vibrant agriculture, industrial and services sectors,” Al Kahlifa said.
Meezan Bank President Irfan Siddiqui requested the government to set a target of acquiring at least 25% of the local funding through Islamic banking as Islamic financial institutions have excess liquidity and limited avenues for investment.
Technical empowerment: ‘when women work, economies win’
Along with economic benefits, the technology and internet boom has empowered women by facilitating remote jobs and increasing overall female employment, experts said on Tuesday.
“Internet is more accommodating for women who cannot go to workplaces due to different restrictions,” Professor Shahida Wizarat, Head of Economics Department at the Institute of Business Management (IoBM), said while speaking at a women empowerment event titled ‘Gender and Trade Conference: Closing the Gender Gap – A Tool for Economic and Trade Development in Pakistan’.
The two-day event was arranged by the Pakistan Women Entrepreneurs Network for Trade (Pakistan WE-NET) and the World Bank Group.
“Female labour force participation in Pakistan is 11% in urban areas and 33% in rural areas,” World Bank Group Senior Economist Yoon Cho stated during her presentation.
“Moreover, 17% males and 60% females in rural areas are employed without pay while the figures in urban areas are 7% males and 14% females.”
Despite progress in female education, large variations remain across the provinces which hinder female participation in the economy, she added.
Cho said 40.2% of unmarried women and 27.73% of married women in the prime age bracket of 25 to 34 years were part of the workforce.
Transport, household responsibilities and childcare are major bottlenecks in developing countries which hinder female participation in the workforce.
“Women are an important source of human capital and should receive skills training, counseling and mentoring for easing their entry into modern industries,” Cho said, adding access to finance, professional networks and knowledge-sharing also needed to be increased.
“Economic policies, including trade policies, are powerful instruments for translating gender equality aspirations into reality,” World Bank Group Finance and Competitiveness Director Zoubaida Allaoua stated.
Australian High Commissioner to Pakistan Margaret Adamson said gender equality was essential for successful economic and social development globally.
Dorothy Tembo, Deputy Executive Director of Geneva-based International Trade Centre, elaborated on the joint mandate devised by the World Trade Organization and the United Nations to strengthen and improve the performance of trade and investment support institutions for small and medium enterprises (SMEs).
Dr Gulden Turktan, founding chair of W20 and member of WBG Gender Advisory Council, while stressing the importance of women for long-term sustainability and development of a country’s economy, said “when women work, economies win.”