Week-on-week: SPI decreases 0.63pc
The Sensitive Price Indicator (SPI) for the week ended August 30, 2018 registered a decrease of 0.63% for the combined income group, going down from 228.6 points in the prior week to 227.17 in the week under review. However, the SPI for the combined income group rose 2.6% compared to the corresponding week of previous year. The SPI for the lowest income group decreased 0.64% compared to the previous week. The index for the group stood at 215.29 points against 216.68 in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics. During the week, average prices of 15 items rose in a selected basket of goods, prices of 11 items fell and rates of remaining 27 goods recorded no change.
Present govt reduces price of petrol by rs2.41 for Sep
The present government has reduced oil prices by up to 5.6% for September, a change that will take effect from Saturday. It is the government’s first official notification on petroleum products since being elected to power.
The price of high-speed diesel (HSD), widely used in the agriculture and transport sectors, has come down by Rs6.37 per litre (5.6%), decreasing from Rs112.94 to Rs106.57 per litre.
Petrol has become cheaper by Rs2.41 per litre (2.5%), down from Rs95.24 to Rs92.83. The demand for petrol has increased following the ban of indigenous gas at CNG retail outlets.
The price of kerosene oil has been reduced by Rs0.46 per litre (0.55%). It will now be priced at Rs83.50.
The rate for light diesel oil (LDO) saw a hike of Rs0.59 per litre, and will now be set at Rs73.96.
The finance ministry said that Prime Minister Imran Khan, on the recommendation of the Oil and Gas Regulatory Authority (Ogra), approved the change in prices of petroleum products.
The Ministry of Energy (Petroleum Division) had earlier proposed a hefty cut in the prices of petroleum products in a bid to provide relief to the consumers.
PTI govt suspends operations at USC
The present government has decided to temporarily suspend operations at the Utility Stores Corporation (USC) after deciding to stop procurement of all commodities.
According to the official order issued by the USC management, as directed by the joint secretary ministry of industries and production, the minister and secretary have directed to stop all kind of procurements at the regional and head offices immediately until further orders.
The USC provides daily use items to low income group at discounted rates. It has 5,500 retail outlets across the country and an employee base of 14,500.
The decision to halt procurement was issued by Adviser to Prime Minister on Industries and Production Abdul Razzaq Dawood and Ministry of Industries and Production secretary as the utility is embroiled in a financial crisis. However, the directive raises a question mark over how the decision could be issued in presence of the utility’s board of directors.
At present, the USC has an inventory worth Rs4.5 billion, which it had procured to meet requirements of utilities across the country. Its monthly revenue is around Rs1 billion. Officials said that Adviser to Prime Minister on Industries and Production had also planned to shut down USC during the Musharraf era but could not succeed.
The USC faced a loss of Rs1.36 billion during the first quarter of financial year 2017-18 with negative equity of Rs1.808 billion and outstanding amount of Rs5.6 billion to its vendors. Consequently, most vendors had stopped supplying stocks to the corporation.
In 2010-11, during the PPP government, its profit was Rs843.19 million and subsidy was Rs8.9 billion. Its profit dropped to Rs775.28 million in 2011-12; however, subsidy increased to Rs12.4 billion. In 2012-13, USC’s profit jumped to Rs1.399 billion and subsidy also increased further to Rs18.53 billion to provide commodities at discounted rates.
However, when the government of PML-N came to power, the profit of the utility turned into a loss of Rs202.32 million in 2013-14 and subsidy also declined to Rs12.544 billion.
The loss of the utility continued to increase to Rs3.94 billion in 2016-17. Its sale also decreased from Rs68.91 billion to Rs57.91 billion in 2016-17. The Ministry of Industries and Production blamed the loss on the nomination of a private board of directors during the previous government, saying that it had no experience of USC’s functions.
Chinese delegation visits PSX
Pakistan continues to remain on the radar of the international community as new Chinese investors visited the industrial hub on Friday to explore business opportunities in diverse fields of the economy.
For the purpose, they held meetings with the mainstream corporate sector and also visited the Pakistan Stock Exchange (PSX), according to a statement issued by the bourse.
“A Chinese delegation representing a Beijing investment group in association with AKD Securities and He Nan Lv Rui Jin Niu Energy Private Limited visited the PSX this morning,” said the statement.
The topics under discussion revolved around listed companies being a good choice for investment, which can be taken as a starting point for business opportunity; along with these, budding businesses and potential initial public offerings (IPOs) are also seen as a lucrative area.
“The team showed interest in the companies poised for listing in various sectors including but not limited to the oil and gas sector, hospitality industry, real estate, and healthcare industry,” the PSX said.
Discussion also centered around investments, scalability and development of the private-sector companies in agriculture, water and tourism sectors. “The delegates mentioned that they are looking across various sectors like the agriculture industry which has a huge potential for growth – soybean and sugar present good business prospects,” it added.
The discussion also focused on the private sector searching to collaborate and enter into business partnerships and alliances to enhance bilateral investment, trade, development and growth especially in the business-to-business sector.
The PSX offered to identify various potential corporates and sectors on an ongoing basis to the visiting potential investors for their interest and also to facilitate them to explore and initiate business.
In line with the tradition of PSX, delegates rang the opening bell and announced beginning of trading for the day.
PKR stable against $
The rupee remained stable against the dollar at Rs124.1/124.3 in the inter-bank market on Friday compared with Thursday’s close of Rs124.1/124.3. Following reports that China had agreed to immediately lend $2 billion to Pakistan, the rupee had appreciated against the US dollar. Prior to this, it had lost 22% of value since December 2017 after the central bank reportedly abstained from intervening in response to the pressure due to a widening current account deficit. The State Bank of Pakistan has maintained that the slide in the rupee’s value is due to supply and demand dynamics of foreign exchange in the inter-bank market. While it has promised prompt intervention in case of speculative or momentary pressures, the central bank will sit on the fence and let “market-driven adjustment in the exchange rate to continue to contain the imbalance in the external account and sustain a higher growth trajectory”, according to a press statement.
FBR’s tax collection grows 14pc to Rs 506 bn
The Federal Board of Revenue (FBR) has collected Rs506 billion in taxes in the first two months of the current fiscal year as the government scrambles to search for new avenues for revenue receipts in an attempt to reduce the projected budget deficit to less than 5% of the national economy.
Provisional tax collection in July-August FY19 stood at Rs506 billion, according to FBR officials. It was Rs62 billion or 14% higher than the revenue generated in the same period of previous fiscal year.
Tax authorities managed to meet the first two-month tax collection target on the back of Rs31 billion in receipts under the one-off tax amnesty in July.
The tax collection in August alone increased slightly to Rs250 billion, up 5.5% over the same month last year. However, it was less than the monthly target of Rs281.5 billion.
The trend suggests that upcoming months will be challenging for the FBR. The Pakistan Tehreek-e-Insaf (PTI) government has already started a drive to collect an additional Rs400 billion in taxes above the annual target of Rs4.435 trillion.
There is a huge scope for improving tax collection as the country faces revenue losses due to under-invoicing, smuggling of consumer goods and sales tax leakages at the domestic stage.
The Tax Reforms Commission, which submitted its report two years ago, had suggested measures for plugging revenue leakages, but they were not implemented.
The PTI government has appointed Dr Jahanzeb Khan as the new FBR chairman with the aim of tackling lobbies and enhancing revenue collection.
The previous National Assembly had approved an annual tax collection target of Rs4.435 trillion. The FBR requires 15.5% growth to reach the target as it closed the last fiscal year with collection of Rs3.842 trillion.
Tax authorities blame the Rs135-billion tax relief given by the previous PML-N government, restriction on collection of taxes by the telecommunication sector and lack of resolution of administrative issues for the slower pace of increase in revenue receipts.
They said massive tax cuts for individuals had started affecting the revenue growth.
Former finance minister Dr Hafiz Pasha and former central bank governor Shahid Kardar have also criticised the lowering of tax rate by the last government in a joint article. They argued that the tax relief was “inexplicable and utterly unjustified”, which has disproportionately benefited individuals with higher income.
The PTI government has already started contemplating to reverse the tax cuts and a presentation has recently been given to Prime Minister Imran Khan. It could cut the effective income tax exemption limit from Rs1.2 million to Rs800,000 besides increasing the maximum tax rate to at least 20%, said sources in the FBR.
The proposal is part of measures to reduce the projected 7% budget deficit to 5% of gross domestic product (GDP) for fiscal year 2018-19 .The plan included additional tax collection of around 1% of GDP or Rs385 billion, the sources said.
Government circles were of the view that the annual customs duty collection target of Rs735 billion had been understated by about Rs100 billion. This assumption is based on the fact that after presentation of the last budget, the rupee depreciated by about 9%, which would lead to increase in tax collection at the import stage.
Secondly, due to increase in crude oil prices in the international market, the FBR will also get relatively higher taxes at the import stage on petroleum products.
LCCI urges economic diplomacy
The Lahore Chamber of Commerce and Industry (LCCI) has underlined the need for ‘economic diplomacy’ to strengthen Pakistan’s trade ties with the rest of the world. LCCI President Malik Tahir Javaid said that Pakistan cannot remain in isolation in the present economic arena where other countries are working hard to get maximum share in international trade. “China, United States, Germany, Japan, South Korea, France, Italy, Hong Kong, UK and Canada are the top-ten exporters,” he said. “Pakistan is lagging far behind despite having one of the best geographical locations, ideal coastline, ports and all kinds of resources.
Economic diplomacy is defined as the decision-making, policy making and advocating of a state’s business interests,” he said. “Its agenda should include promotion of national economic interests in other countries, informing and updating potential foreign investors on opportunities, negotiating economic and trade agreements, etc.
The LCCI chief remarked that the role of Pakistan’s embassies abroad is essential. Their mission should be to negotiate between governments. “Pakistani embassies should also play a much more active role in promoting investment, exports and general businesses,” he added.