. .

Jun 26 - Jul 02, 2000

Oil companies to invest $450m

Foreign companies who made seven gas discoveries in Pakistan, have committed an investment of $450m for the development of these fields.

Federal Minister for Petroleum Usman Aminuddin on Tuesday said Pakistan has already signed five gas sales-purchase accords with exploration companies while similar accords are expected to be signed in the coming two weeks.

The minister who was addressing a press conference after returning from Paris where he attended World Petroleum Conference was assisted by Secretary Petroleum Abdullah Yousaf and spokesman for the ministry Jehangir Bashar.

The minister said that under the agreed formula, the government will provide oil at $10 per barrel to the company. If the price of oil remained within $10 to 15, the price provided in Petroleum Policy '97 would be applicable.

If the price of oil in international market was more than $ 15, $20, 50% benefit will go to the producer and 50% to the government. In case the price of oil was $20 to $25, benefit to the producer will be 30 % and 70% will go to the government.

Similarly if the price of oil per barrel went beyond $ 25, benefit to the producer will be 20% and the remaining 80% will go to the government

The payment to the companies will be made partially in US $ and in rupees, keeping in view currency aspect of expenditure and the participation of local and foreign partner in joint venture. The minister said that efforts to open up prospective areas of in Balochistan for exploration activities have made progress. He said a plan had been submitted to the provincial government by a committee comprising minister for interior, minister for Petroleum and governor Balochistan.

SBP allows rupee-slide by 20 paisa

The State Bank on Thursday allowed banks to buy and sell the US dollar in a new unofficial band of Rs52.10 and Rs52.30 — up from Rs51.95/Rs52.10. Bankers said that the greenback changed hands at Rs 52.20/Rs 52.27 in spot transactions in the inter-bank market after the SBP move. Currency dealers said that the dollar closed 10 paisa up at Rs54.70 and Rs54.75 in the open market against the Wednesday close of Rs54.60 and Rs54.65.

Explaining the rationale for a new informal exchange rate band, the SBP governor, Dr Ishrat Husain, said at Karachi Chamber of Commerce & Industry that it was done because of more demand for foreign exchange in the market on Thursday. He also referred to the depreciation of Indian rupee while commenting on the downward adjustment of Pakistan rupee.

This becomes an important reference when seen in the backdrop of the total depreciation in the value of Indian and Pakistan currency since July 1, 1999. As per calculation, both the currencies depreciated about one per cent during this period. The Indian rupee fell to 44.68 to US dollar on 22nd instant from 43.32 on July 2 last year whereas Pakistan rupee fell to 52.30 from 51.63.

Profit rate on savings schemes cut by 1.5%

The government has reduced for the third time within a year the rate of interest on national savings schemes (NSS) by an average of 1.5% in respect of new investments.

On earlier occasions, the profit rate was brought down by 2% each. This means that the interest rate on these schemes has been reduced by about one-third, to 10.5pc.

Justifying the decision in his budget speech, the finance minister said that the NSS constituted a major distortion in the financial sector because they offered "unduly high rates of return thereby crowding out the private demand for credit".

To "correct" this situation, he said, the government had lowered the rate of return on NSS by two percentage points. Also, now only individuals were allowed to invest under the NSS. Since inflation was running at less than 4%, there was a need for further rationalization of rate of return on NSS, the minister asserted. He, however, clarified that the existing investments would continue to enjoy the rates at which they were made.

Pharma cos' profits

Tahir Iqbal, chairman, Communication sub-committee, Pharma Bureau said on Wednesday that multinationals earned profit after tax of 4.41% on net sales in '97, 0.85% in '98 and 0.25% in '99. Such low profits do not allow industry to survive for long, he added.

In a press statement welcoming the decision to allow 8-10% hike in medicine prices, he said absence of price adjustment and increase in input costs had forced pharmaceutical multinational companies to postpone expansion plans.

He said there has been no increase in medicine prices since Oct '96, the cost of production has risen enormously due to inflation, rupee devaluation, levy of 10% customs duty on raw materials and 15% sales tax on packaging materials. As a result, most of the companies are under heavy financial losses.

He however welcomed the government's decision of allowing eight and 10% price adjustment in controlled and de-controlled medicines which will offset the effects of inflations, rupee devaluation and duties and taxes.

Borrowing by govt to close at Rs28.3bn

The budget documents 2000-2001 project that the government borrowing from banking sector would be at Rs 28.3 billion at the end of this fiscal year on June 30. It is also projected that in 2000-2001 government borrowing for budgetary support would be minus Rs 2.2 billion.

But bankers and economists say translating these projections into reality is very difficult more so if the government cannot cut its non-development expenditures and raise revenue receipts.

Kuwait money changers' plea

Money exchange companies in Kuwait have urged the State Bank to allow reopening their foreign currency accounts to facilitate transfer of US dollars to Pakistan.