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No transmission lines for solar, wind energy plants

The investors engaged in setting up solar and wind power plants are facing a tough time as there are no transmission lines that can supply the electricity generated through renewable resources.

According to officials, the four provinces have not conducted any due diligence for laying transmission lines but have issued a number of Letters of Intent (LOI) to the investors for setting up renewable energy plants.

They said the provincial governments had no idea of the availability of transmission lines at the sites of proposed solar and wind power plants.

The Sindh government has issued over 51 LOIs for the installation of wind power plants in the province whereas Punjab is in the process of granting the LOIs. Officials were of the view that the present transmission system had no capacity to supply electricity from the new renewable energy plants.

They also pointed out that prices of the equipment required for setting up renewable energy plants had gone down substantially in the international market, which had brought down the cost of power generation through renewable resources.

They revealed that the government was also considering encouraging the establishment of renewable energy plants due to the reduction in its production cost.

Experts suggest that renewable energy plants could be better for the entire energy chain as they would not only reduce the cost of electricity for the consumers but would also lead to savings of foreign exchange, which is being spent on imported fuels like furnace oil and liquefied natural gas (LNG).

At present, the entire energy chain has been plagued by the growing circular debt and cheaper energy generation will help reduce the debt.

Pakistan’s total power generation capacity in 2016 stood at 20,857 megawatts. At present, the number of power plants in the country stands at 1,077 and the total installed capacity is 33,836MW.

The power production capacity will rise to 51,694MW by 2022 if the projects planned by the previous Pakistan Muslim League-Nawaz (PML-N) government are completed by the new Pakistan Tehreek-e-Insaf (PTI) administration.

During the PML-N tenure, the Ministry of Water and Power had proposed putting restrictions on the share of renewable energy at 10% of the total installed capacity, saying solar and wind power projects were operating at a much lower efficiency and creating problems for the national grid.

The ministry had also proposed a cap on the installation of nuclear power plants in the future because of concerns over its high cost of production.

However, officials suggested that the cap should be placed on the power plants based on imported fuel like furnace oil which had been abandoned around the world and focus should be on projects based on domestic resources.

They said many countries across the world had switched to renewable resources due to high oil prices and therefore, Pakistan should also encourage the establishment of wind and solar power plants to reduce reliance on imported fuels and ease the pressure on foreign exchange reserves.

Cigarette manufacturer tells sin tax will cut market share

“Two (cigarette manufacturing) companies, which have 60% market share, pay 98% of the taxes and the remaining, whose market share is 40%, pay only 2% of the taxes. So the ones that are paying (higher) taxes are in loss,” Prime Minister Imran Khan said in a speech he delivered at the end of his government’s first 100 days on November 29, 2018.

The statement raised hopes of tax-paying industrial players that the government was conscious of the grave taxation issues and it would direct its focus to reducing the taxes.

On the contrary, the government is now considering imposing a new tax – sin tax of Rs10 per cigarette packet – which contradicts with its vision of addressing the industrial issues through rationalisation of taxes.

“The new tax will further eat into our market share and increase our losses,” Philip Morris Director Corporate Affairs Khurram Mohammad Qamar said while talking to a group of journalists on Friday.

“The increase in taxes will not reduce the consumption of cigarettes in Pakistan, which remains the ultimate objective of the government,” he suggested. “Instead, it will divert smokers from tax-paid cigarettes to illicit cigarettes.”

Had the taxes discouraged smoking, the company would have no moral grounds for demanding tax reduction from the government, the director emphasised. Sharing his analysis, he said facts suggested that the increase in taxes had brought down tax collection as well.

The share of taxes in retail prices falls in the range of 53-72%, depending on the brand, for the cigarette manufactured and marketed by the two tax-paying industrial players.

On the contrary, some 21 tax-evading players were selling cigarettes at prices as low as Rs25 per pack, which was much lower than the minimum tax of Rs34 (or 53%) the company paid on a cigarette pack, he said.

“Locally manufactured illicit cigarettes (which come to 90% of the illegal market in Pakistan) pose a bigger threat to the industry compared to smuggled cigarettes,” he said.

An Oxford Economics’ study, published in September 2018, concluded that Pakistan ranked number one in Asia for consuming illicit cigarettes. Smokers in Pakistan consumed 32.6 billion illicit cigarettes, which translated into 41.9% of the total consumption in 2017, said the study which covered 16 regional countries.

An industry official, on condition of anonymity, added that some current and a few former senators and members of the National Assembly owned the illicit cigarette manufacturing factories in Mardan, Swabi and Azad Jammu and Kashmir.

“A former minister of Khyber-Pakhtunkhwa is running one of the illicit cigarette factories,” he claimed.

China, Pakistan set new targets for cooperation

Minister for Planning, Development and Reform Makhdoom Khusro Bakhtiar has said that the 8th Joint Cooperation Committee (JCC) meeting has set new targets for Pakistan-China cooperation, leading CPEC towards becoming a true economic corridor with multiple doors.

He expressed these views after conclusion of the 8th JCC proceedings in Beijing on Friday.

The minister added that as per vision of the leadership, work on the China-Pakistan Economic Corridor (CPEC) was accelerated and its scope was expanded by opening its doors for industrial cooperation, agriculture and socio-economic development.

Bakhtiar added that Pakistan and China agreed to further strengthen the JCC mechanism through increased frequency of exchanges.

“Signing of an MoU on industrial cooperation will steer Pakistan into a new era of industrialisation and help expedite development of Special Economic Zones (SEZs) through relocation of Chinese industries,” the minister said.

“Enhancing cooperation to cover diverse industries such as textile, petrochemical, iron and steel, mines and mineral, and automobile is a new target of CPEC.”

He pointed out that Pakistan-China cooperation in the agriculture sector would focus on attracting investment in food production, processing, logistics, marketing and exports through joint ventures between companies of the two sides.

That cooperation would transform Pakistan’s agricultural economy, benefiting from Chinese technologies, experiences and supply chains, which would help Pakistan to increase its exports significantly, he said.

First meeting of the joint working group on agriculture is planned to be held in the first quarter of 2019.

 

“The newly established joint working group on socio-economic development has framed an action plan which provides guidelines on future cooperation in education, agriculture and related sectors,” he revealed.

“Development initiatives in these sectors will be launched within a short span of time to uplift less developed areas, particularly Balochistan, as well as southern Punjab, southern Khyber-Pakhtunkhwa, northern Sindh and Gilgit-Baltistan.”

He pointed out that in the next phase of CPEC, the two sides agreed to cooperate in the maritime sector, port development and the automobile sector.

The minister emphasised that future focus of the energy sector would remain on power projects based on domestic resources and transmission line projects, following an integrated energy plan. He vowed to promote development of hydroelectric power projects on the Jhelum River cascade and in Gilgit-Baltistan.

“The government prioritises connectivity aligned with CPEC as well as Belt and Road vision,” the minister stressed and said the government had prioritised the development of road projects in Gilgit-Baltistan, Khyber-Pakhtunkhwa, Balochistan and southern Punjab.

Pakistan would explore an innovative financial model including build, operate and transfer (BOT) mechanism in order to finance mega connectivity projects.

SPI increases 0.12pc

The Sensitive Price Indicator (SPI) for the week ended December 20, 2018 registered an increase of 0.12% for the combined income group, going up from 237.83 points in the prior week to 238.12 in the week under review. However, the SPI for the combined income group rose 5.36% compared to the corresponding week of previous year. The SPI for the lowest income group rose 0.17% compared to the previous week. The index for the group stood at 219.77 points against 219.4 in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics. During the week, average prices of 17 items rose in a selected basket of goods, prices of 12 items fell and rates of remaining 24 goods recorded no change.

With UAE aid, Pak bridges half of financing gap

With an announcement by the United Arab Emirates (UAE) that it is giving $3 billion in loans, Pakistan government has bridged half of the financing gap after including Saudi Arabian assistance, but it still waits for another $6 billion that will mainly come from commercial banks.

The Ministry of Finance’s financing lineup shows deposits of $6 billion by the monetary authorities, after the assistance from the UAE and Saudi Arabia. On top of that, receipt of $4.3 billion has been estimated on account of oil financing facilities from the Islamic Development Bank and Saudi Arabia during the current fiscal year.

Still, $4.5 billion would be required in commercial loans from foreign banks to meet the revised external financing requirement of $22 billion, said sources in the Ministry of Finance.

With an announcement by the United Arab Emirates (UAE) that it is giving $3 billion in loans, Pakistan government has bridged half of the financing gap after including Saudi Arabian assistance, but it still waits for another $6 billion that will mainly come from commercial banks.

The Ministry of Finance’s financing lineup shows deposits of $6 billion by the monetary authorities, after the assistance from the UAE and Saudi Arabia. On top of that, receipt of $4.3 billion has been estimated on account of oil financing facilities from the Islamic Development Bank and Saudi Arabia during the current fiscal year.

Still, $4.5 billion would be required in commercial loans from foreign banks to meet the revised external financing requirement of $22 billion, said sources in the Ministry of Finance.

They said Pakistan had already received $450 million worth of foreign commercial loans in first five months of the current fiscal year and it needed another $4 billion in the remaining seven months.

The UAE announced on Friday that it would deposit $3 billion in the State Bank of Pakistan (SBP) to bolster the country’s dwindling foreign currency reserves. With the announcement, the UAE will match the assistance from Saudi Arabia, which had agreed to park $3 billion in Pakistan’s foreign exchange reserves.

In a statement carried by the state-run WAM news agency, the Abu Dhabi Fund for Development said it would deposit the much-needed money in coming days to enhance Pakistan’s liquidity and reserves of foreign currency.

Prime Minister Imran Khan tweeted on Friday to thank the UAE for helping Pakistan in times of distress.

Saudi Arabia has already announced a $6-billion assistance package, equally divided between cash and oil supply on deferred payments. Of that, $2 billion has already been deposited with the central bank.

In the outgoing week, Finance Minister Asad Umar told a parliamentary panel that Pakistan would pay 3.18% interest on the Saudi loan.

“It is expected that loan terms for the UAE financial assistance will be similar to the Saudi loan,” said a senior government official.

The cost of borrowing from Saudi Arabia is almost triple the price China has charged for placing $3 billion with the SBP as a deposit.

For the current fiscal year 2018-19, the finance ministry has projected that gross external financing requirement of Pakistan will be $22 billion, down from initial estimates of $28 billion. This is primarily due to reduction in the current account deficit projection from $19 billion to around $13 billion, according to the ministry’s estimates.

During the first five months of FY19, the current account deficit stood at $6 billion, which was 11% less than the comparative period of previous year. But the pace was not enough to restrict the deficit to $13 billion in the remaining seven months of the year.

Debt servicing has now been estimated at $8.8 billion, suggesting repayment of some of the maturing deposits has been deferred.

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