Dec 25 - 31, 2000
World Bank seeks withdrawal
of Rs11bn gas subsidy
The World Bank has asked Islamabad to withdraw Rs11 billion annual
subsidy being extended to the local fertilizer industry on natural gas to make these units
"Given the adverse nature of Pakistan's budget and trade deficit,
gas subsidy for the fertilizer industry seems no longer a tenable policy," Abid
Hasan, World Bank's Operation Advisor has pointed out to the concerned government
The World Bank has already proposed 14 "best practice
principles" and suggested Pakistan to make them part of its new fertilizer policy
being announced next month. It said the withdrawal of subsidy was necessary to remove
existing distortions in the economy.
WB sources told on Wednesday that in a December 19 letter, Hasan asked
Islamabad to consider these proposals before announcing the new policy.
The WB said fertilizer industry consume over one-fourth of natural gas
produced in the country. It enjoys an annual subsidy of Rs11 billion on natural gas used
as input. "The direct cost of gas subsidy may be greater if one considers that around
$2.5 billion a year was spent on oil imports this year," the WB said.
"Although need for a serious and urgent restructuring of
fertilizer industry is clearly recognised by all the quarters, there is less consensus on
the dynamics of the path clearly."
As a first step, the bank said, medium term vision behind the new
policy framework should be efficient use of resources, not only in fertilizer industry but
also in the rest of economy that is affected by the pricing policies in the fertilizer
It said that support of fertilizer industry for the sake of increasing
local production should not be at the cost of end- users, especially the farmers. The new
policy should not be aimed at providing subsidised fertilisers to the farmers.
KESC gets loan guarantee
The Economic Coordination Committee of the federal cabinet has agreed
to provide a government guarantee to the commercial banks, to enable Karachi Electric
Supply Corporation (KESC) in obtaining a loan of three billion rupees, for bailing itself
out from the "worst financial crises", a reliable source told.
The KESC is also the recipient of a $250 million Asian Development Bank
loan, approved on December 15, for restructuring the organization.
The source said the looming threat over the KESC, regarding deduction
of Rs3 billion from the current year's budgetary allocations by Islamabad, on account of
recovery of foreign relent loans; had been removed after the ECC decided to provide a
supplementary grant from the federal government, to the corporation, to overcome its
$20m LPG terminal
Keloil has awarded a contract worth more than $20 million to Australian
engineering company Process Control Technology (PCT) Pty Ltd, for the design, construction
and commissioning of an LPG terminal, to be built at Port Qasim, Karachi.
According to a press release part of PCT's offer included equity
participation in the operating company, Keloil Pakistan.
The Malaysian and Australian firms will be partner in the
implementation of the first Engineering, Procurement, Construction and Commission contract
(EPCC) of its kind to utilize the Islamic method of funding, to be provided by a
consortium and managed by the Bank of Islam.
The government has decided to appoint a Financial Adviser to assist in
the restructuring of the gas utilities, prior to their privatization, it was officially
stated on Thursday.
The Financial Adviser would undertake the restructuring and
privatization of both the gas utilities. This was being done so that proceeds from the
sale could be maximized while ensuring that the gas market developed in a competitive
Diesel prices may not be deregulated in 2001 as the government intends
to allow oil marketing companies (OMCs) to import the product directly from April next
year to avert any price surge, sources in oil industry said.
The biggest obstacle in price deregulation is how to dismantle the
freight pool system under which the government ensures uniformity in prices throughout the
country, sources told on Wednesday.
The Privatization Commission (PC) has completed the pre-qualification
process for the privatization of Pak Saudi Fertilizers Limited (PSFL). A Pre-qualification
Committee scrutinized the documents furnished by the applicants, it was officially stated
The parties which met the conditions laid down by the Privatization
Commission and were pre-qualified include Dawood Hercules Chemicals Ltd, Engro Chemical
Pakistan Ltd, Fauji Fertilizer Company Ltd Consortium (subject to banks clearance one week
before the bidding date) and Jaffer Brothers Consortium.
First mutual fund merger
Confidence Mutual Fund Limited (CMF) is to merge with BSJS Balanced
Fund Limited (BBF) in what the two companies say would be "the first merger of mutual
funds in Pakistan".
In a statement to the KSE on Tuesday, the two companies said that the
proposed swap ratio would be one share of BBF for one share of CMF. The regulator, SECP,
was said to have cleared the deal, subject to the compliance of the Companies Ordinance,
1984. Following the completion of the amalgamation of the two mutual funds, the paid-up
capital of BSJS Balanced Fund will be raised to Rs250 million, from the Rs150 million at
end-June 2000 and the net assets will increase to Rs257.5 million, from Rs154.45 million.
PSO selects five foreign firms
The Pakistan State Oil (PSO) has awarded term contract to foreign
bidders for the supply of 3.8 million tons of fuel oil including 3.4 million tons of high
sulphur fuel oil (HSFO) and 400,000 tons of low sulphur fuel oil (LSFO) for the period of
January-December 2001. The three lowest bidders Bakri Trading, Fal Oil and Marubeni
were selected to supply HSFO to the country under the term contract.