Tax cut on lpg imports turns locally produced gas expensive
The government’s decision on reducing taxes on the import of liquefied petroleum gas (LPG) has liberalised imports and made the locally produced gas very expensive.
The reduction in taxes has made imported gas cheaper by up to Rs21 per kilogramme to Rs95 for the distributors compared to the one locally produced and sold at Rs116 per kg to them.
Both the gases, however, are sold at a uniform price of Rs130 per kg in retail in Karachi and other parts of the southern region of the country and at Rs130-140 per kg in upcountry, distributors told Petroleum Secretary Mian Asad Hayauddin at a meeting in Islamabad on Friday.
The gas is largely used by domestic consumers, particularly in upcountry during the winter season as pipeline gas remained unavailable to these areas.
“Petroleum secretary has assured us to present the issue before the high-powered ECC (Economic Coordination Committee) to end discrimination between the two (imported and local) gases,” All Pakistan LPG Distributors Association Chairman Muhammad Ali Haider told.
The government’s decision of cutting taxes came at a time when it is making overall imports expensive through structural changes in monetary and fiscal policies to reduce the demand for dollars in the economy.
Earlier, the government has imposed regulatory duty on the import of 570 items and the withdrawal of the duty on LPG is in contrast to the structural change.
Power companies to recover Rs140bn to offset support package cost
The government has set a target of Rs140 billion for power distribution companies which will recover it through reduction in line losses and increase in collection of electricity bills in order to offset the impact of an industrial support package.
Officials told that the Power Division would push down current line losses and improve the recovery of electricity bills for which a target of Rs60 billion had been set for the current financial year 2018-19.
In addition to that, a target of Rs80 billion was set for the last financial year 2017-18 to offset the impact of the industrial support package.
The government has decided that industrial consumers will continue to receive a support package of Rs3 per unit. The package will be funded through efficiency gains in the power sector with improvement in bill recoveries and reduction in distribution losses and theft.
The tariff change for industrial consumers will remain within the revenue requirements. The government also decided that average tariff increase over the last notified tariff would be Rs0.78 per unit. Five zero-rated industries would be given a rate of 7.5 US cents per unit.
The prime minister’s initiative to control power theft has been launched in Punjab through a joint task force of the Power Division and the provincial government. A similar exercise will be launched in all other provinces.
The non-recovery of electricity bills was estimated at 10% amounting to Rs114 billion in 2017-18. In order to improve the recovery, a target of 2% per year, amounting to Rs23 billion, had been set through the use of technology and administrative measures.
Defunct lakhra energy plant to be rehabilitated with private investment
The indigenous coal-powered Lakhra Power Plant, which has remained out of operation since July 20, 2017’s fire incident, will be rehabilitated under a public-private partnership model.
Senate Sub-Committee on Power Convener Senator Nauman Wazir Khattak floated this proposal and received an affirmative response from the stakeholders at a meeting at Lakhra Power Generation Company Limited (LPGCL) in Jamshoro district on Friday.
“If we ask the [federal] government to provide some billions [of rupees] for this project, which is though a very important project, we will have to delay the overhaul and wait at least until the next budget,” he said after the meeting.
He pointed out slashing of Rs150 billion from the Public Sector Development Program (PSDP) in the supplementary finance bill to contend that the government is unlikely to earmark funds for the plant.
The senator emphasised that a private company, preferably based in Pakistan, should be allowed to invest in the holistic overhaul of this 150 megawatts plant and given its operational control under a profit sharing formula for up to 10 years. According to him, this investment model is different from privatisation and even the build, operate and transfer (BOT) model.
“We call it balancing, modernisation, operate and transfer – (BMOT) model. After completion of the contract period, the plant will be returned to the government.” He said 186 state-owned enterprises are causing a financial loss of Rs1,300 billion every year, adding that the model’s success at Lakhra will be replicated in other state-owned enterprises as well.
“The government will give, for example, around Rs1 per unit profit to the partnering company,” he explained. Khattak estimated that the generation cost at Lakhra should ideally be priced around Rs6 per unit.
According to LPGCL’s estimate, a sum of $33.51 million or around Rs4.9 billion will be required for the rehabilitation of the plant, which has incurred losses of about Rs12 billion since its commissioning in 1996. The companies interested in taking up the operational control of the plant are yet to come up with their estimates.
Khattak, who belongs to the ruling Pakistan Tehreek-e-Insaf, expressed the hope that the committee is likely to complete the process of selecting a private partner under the Public Procurement Regulatory Authority (PPRA) rules in a month. The rehabilitation will take another six to seven months before the plant starts contributing electricity to the national grid, he added.
“The good news is that the plant can be completely revived,” he said, adding that the plant will provide employment to 1,000 to 1,200 people at the plant and between 7,000 and 8,000 people at the Lakhra coal mines. Currently, 351 staff works at the redundant plant while at the peak of its operation when all the three 50 MW units worked the staff’s strength was 1,170.
According to him, Chinese, German and Japanese companies have also shown interest in the plant but he reiterated that a local company will be preferred. The representatives of two local companies also attended the meeting and briefly discussed their proposals.
Export-led growth can overcome deficit: APTMA
All Pakistan Textile Mills Association (Aptma) Chairman Syed Ali Ahsan has appreciated the government for recognising the importance of export industry because an export-led growth is a way forward to overcome the trade deficit and the consequent financial crisis.
“The government has met its commitment to the crisis-ridden export industry (five export-oriented sectors) by announcing regionally competitive tariffs for both gas and electricity,” he said at a press conference at the Aptma Punjab office on Friday.
“The initiative of flat regionally competitive electricity tariff will not only reduce inter-provincial disparity, but also the inter-sector disparity.” Now, prime users of electricity would enjoy the same tariff as the captive industrial units, he added.He said resolving the energy affordability issue was a step towards reviving 30% closed or idle capacities, which is located predominantly in Punjab. However, he added, this regime should continue for the next five years for the growth of industry.
Chinese envoys brush aside ‘misconceptions’ about CPEC-projects
Chinese Ambassador to Islamabad Yao Jing said on Friday his country would provide all possible assistance to help Pakistan meet the economic challenges, as both the nations are set to lay foundation for implementation of second phase of the China-Pakistan Economic Corridor (CPEC).
“We understand right now Pakistan faces some challenges and definitely as a friend China will extend whatever assistance possible,” said Yao Jing while speaking to the media at the Chinese embassy.
The embassy was holding a four-hour long briefing to share details of the upcoming visit of Prime Minister Imran Khan, the future bilateral cooperation and the status of CPEC and misconceptions about it.
The ambassador said the Chinese leaders, government and people are eagerly looking forward to the historical visit of Prime Minister Imran Khan.
“In terms of financial assistance, during the visit of the prime minister we will provide hopefully a grant to the Pakistani government and at the end of the visit there will be good news,” said Lijian Zhao, the deputy chief of mission of Chinese Embassy.The deputy envoy said China does not want to embarrass Pakistani friends but it has provided huge support for stabilising foreign exchange reserves. Only the China Development Bank has provided $2.7 billion commercial loans, he added.
Pakistan has sought financial aid from China, Saudi Arabia and United Arab Emirates. It has so far secured $6 billion lifeline from Saudi Arabia.
The deputy envoy said many agreements and memorandum of understanding (MoUs) will be signed at the end of the PM’s visit. China wants to help Pakistan build its manufacturing capacity.
Khan will attend China’s International Import Expo as chief guest. “This is the major platform for Pakistan to build its image of pro-business, pro-development policies for an emerging Pakistan,” said Chinese ambassador. He said Invest more in Pakistan and buy more from Pakistan is China’s policy.
“China’s capital, China’s technology and also China’s huge market could be a major contributor towards Pakistan’s future development,” he added.
He said during the first face-to-face exchange between Prime Minister Imran Khan and President Xi there will be discussions on current cooperation in different areas and the future cooperation in the economic, social, defense and cultural areas.
The ambassador said China wants to see Pakistan grow economically strong that will also be good for regional peace and stability. “Pakistan has taken new initiatives like offering peace talks to India and showed readiness to play a role in peace in Afghanistan,” said the envoy.
BOI stresses need for deepening ties with germany
The economic partnership between Pakistan and Germany has shown positive trends in recent years, however, it needs to be strengthened further, said Board of Investment (BOI) Chairman Haroon Sharif.
Sharif was addressing the Pakistan-Germany Investment Forum, organised by the BOI and attended by a German delegation from the Bavarian Ministry of Economy, Energy and Technology and the German Federal Chamber of Commerce and Industries.
The delegation comprised representatives of around 40 companies, two officials of the Bavarian ministry and one from the German chamber.
Talking about the investment climate, the BOI chairman pointed out that Pakistan was open for business and invited investors to take advantage of the opportunities, particularly in the large consumer market. He highlighted that Pakistan was the gateway to western China after the launch of the China-Pakistan Economic Corridor (CPEC) and was a logistics hub.
Sharif cited renewable energy, information technology, food and dairy and services as the prominent sectors that required investment. In addition to the investment, the chairman called for forging partnerships and reviewing other prospects. Speaking on the occasion, PM Adviser on Commerce, Textile, Industries, Production and Investment Abdul Razak Dawood emphasised that Pakistan was dealing with the macroeconomic challenges successfully. “All these advantages coupled with a friendly investment policy offer ideal opportunities for investment in
Saudis trumpet $56bn deals as conference ends amid partial boycott
Saudi Arabia said it signed $56 billion of deals at an investment conference this week and expected the United States to remain a key business partner despite a partial boycott of the event over the killing of Saudi journalist Jamal Khashoggi.
More than two dozen top officials and executives from the United States and Europe, including US Treasury Secretary Steven Mnuchin and chief executives of big banks, boycotted the investment conference over the killing of Khashoggi inside the Saudi consulate in Istanbul on October 2.
Still, the three-day Future Investment Initiative conference drew hundreds of businessmen and government officials from around the world to a palatial venue in Riyadh, aiming to attract foreign capital to support Saudi economic reforms. “There were more than 25 deals signed worth $56 billion,” Saudi Energy Minister Khalid Al-Falih told state television on Thursday, adding that US companies accounted for most of those contracts.
He added, “The US will remain a key part of the Saudi economy because the interests that tie us are bigger than what is being weakened by the failed boycotting campaign of the conference.”