DECLINE IN OIL PRICES TO HELP CHECK HIGH INFLATION
Jan 19 - 25, 2009
The inflation-hit Pak economy may get a relief in case government decides to pass on the impact of dwindling international oil prices to domestic petroleum products.
The government is facing strong criticism from its opponents for not passing relief of declining oil prices in the international prices to the masses. On the other hand, the government is facing pressure due to high import bill. The government estimates that the furnace oil import bill will surge to $3 billion during the current financial year due to higher demand by Independent Power Producers (IPPs) for power generation to overcome the shortfall. High oil prices are the main cause of inflation.
Analysts believe that three years ago when crude oil price in international market was at $40 per barrel the price of per litre diesel in the local market was Rs 26 and petrol Rs 40 respectively. The crude oil price has again come to the level of $40 in the international market but the government is charging Rs 20 extra on per liter diesel and Rs 17 on petrol by charging Rs 56 and Rs 57 per litre for diesel and petrol respectively. The government has failed to pass on the record decrease in oil prices to common man and is still receiving the old prices, which are very high as compared to international market, they adds.
They were of the view that cut in the oil prices commensurate with decline in the international market could check rising inflation in the country which has become one of the serious concerns for the policy makers. As high oil prices are main cause of inflation the government must take appropriate measures to facilitate masses, they asserted.
GOVT. EARNING ADDITIONAL RS 18 BILLION PER MONTH THROUGH PDL
Leader of Opposition in National Assembly, Chaudhary Nisar Ali Khan alleged that the government is earning additional Rs 18 billion per month from consumers through petroleum development levy (PDL) on petroleum products. According to Chairman Senate Standing Committee on Interior Senator Talha Mehmood, the government has failed to pass on the record decrease in oil prices to common man being charged prices according to old petroleum prices which are very high as compared to international market. According to present rate in international market per litre rate of petrol in Pakistan should be less than Rs 30, while government is charging about Rs 58 per litre, which is not justified. Furnace oil import may reach 5.5 million tons according to official estimates. The import of furnace oil is estimated to reach 5.5 million tons costing around $3 billion during the current financial year. Actual import of furnace oil stood at 4.3 million tons that cost $2.1 billion during the last financial year i.e. 2007-08.
In 2006-07, the total furnace oil consumption stood at 7,473,800 tons and out of it 4,309,000 tons was imported at a cost of $1.458 billion. The actual consumption of furnace oil in the country stood at around 7.6 million tons last year - 40 percent of total oil demand. The government has estimated around 10 million tons furnace oil demand during the current financial year.
The country's total furnace oil consumption stood at 4,592,300 tons in 2004-05 and 1,455,000 tons furnace oil was imported at a cost of $291 million. In 2005-06 furnace oil consumption increased to 5,112,300 tons out of which 1,905,000 tons was imported to meet the country's requirements. Total demand of electricity is around 11500 MW per day and the country has to rely on IPPs that have the capacity to produce 5650 MW power. At present IPPs are generating 4000 MW to 4500 MW electricity per day.
POWER SHORTAGE AFFECTING COUNTRY'S EXPORTS
Punjab Chief Minister Mr. Shahbaz Sharif said that Pakistan is facing serious energy crisis and the government is taking effective measures for coping with this problem, like working on a number of projects on generation of electricity from both hydel and coal.
Pakistan is facing a deficit of more than 4500MW at present and there is a dire need for investment in this sector in the interest of agricultural and industrial sectors, he said. Shahbaz also said that negotiations are also being held with China in this regard while Independent Power Producer Forum has also visited Punjab and expressed keen interest in investment in energy sector.
According to Mr. Shahbaz Sharif, power shortage is also affecting our exports besides leaving a negative impact on various sectors. Though heavy borrowing were made in the past but instead of using this money on public welfare and power generation projects it was wasted on luxurious living which was a great disservice to the nation. Efforts have also been made for capacity-building and activating Punjab Power Development Board.
WAKE-UP CALL TO THE ECONOMIC MANAGERS
Moreover, the Lahore Chamber of Commerce and Industry has given a wake-up call to the economic managers of the government and asked them to take the textile sector closure threats seriously by initiating serious measures to save it from a total collapse.
LCCI Senior Vice President Mr. Tahir Javaid Malik while presiding over a meeting of the owners of textile units at Lahore Chamber of Commerce and Industry urged the government to direct the banks to stop charging markup from the textile industry because the industry is not in a position to service the bank loans due to suspension of production activities. He stressed the need for hectic lobbying on the part of the government to ensure duty-free access of Pakistani textiles to Europe and the United States as if Pakistan wins duty-free access, it would also help bring the industry out of crisis.
It is for the first time in the history of the country that the textile sector which contributes more than 60 per cent to the country's total exports has a share of 46 per cent in total manufacturing and employs 38 per cent of the total workforce and is in deep trouble, seeking some bailout package from the government. He said that textile sector is already suffering losses of millions of rupees due to sudden rise in the input costs.
FCIB RATING UPGRADED BY JCR-VIS
First Credit and Investment Bank rating has been upgraded by JCR-VIS Rating Agency from 'BBB+' to 'A-' after a detailed review. According to the details JCR-VIS has upgrade First Credit and Investment Bank (FCIB) rating by taking into account the enhanced equity base and cautious and prudent approach of the management which during 2008 foresaw the coming stock market decline and, therefore, chose to reduce exposure in equities, direct and indirect, thereby minimizing the impact of adverse stock market performance on the company's financials.
In the present economic and financial scenario adverse reporting about the adverse performance of financial sector, especially of NBFCs (Non-Banking Financial Companies) sub-sector is common. This is evident from the financial results for the quarter ended September 30, 2008. However, there are expectations that result for the year ending December 31, 2008 will show further downslide. The fact of adverse performance of the financial sector is further reflected in the latest credit rating downgrades of the financial institutions.
In such a scenario FCIB (formerly First Credit and Discount Corporation) has played a vital part in development of the capital and bond markets in the country under its former name. It got converted into investment bank in 2004. It was listed on the stock exchange in August, 2008. Its present major shareholders include NBP, WAPDA and other banks and financial institutions, besides general public.