SATURDAY JANUARY 21: Resolving circular debt issue: Rs 160 billion term finance facility approved by ECC

ISLAMABAD: The Economic Co-ordination Committee (ECC) of the Cabinet on Friday approved Rs 160 billion term finance facility for the power sector to resolve the issue of circular debt, it is learnt.
Sources said on a summary moved by the Ministry of Water and Power, requesting the ECC that as the power holding company is a public sector entity without assets and is responsible for arranging Rs 160 billion loan for the power sector companies, such transaction cannot be finalised without government guarantee.
On the proposal of the Ministry, the ECC approved issuance of sovereign guarantee of Rs 160 billion by the finance ministry. Meanwhile, a statement said the ECC meeting presided over by Finance Minister Dr Abdul Hafeez Sheikh also approved purchase of 100,000 tons of sugar from the domestic producers as well as natural gas efficiency project. The ECC also directed Zarai Taraqiati Bank Limited (ZTBL) to resume loaning facility to farmers with immediate effect.
The ECC also constituted a sub-committee comprising Minister for Water and Power, Minister for Petroleum and Natural Resources, Deputy Chairman Planning Commission and Secretary Finance to look into Gas Sale Purchase Agreement with Turkmenistan along with gas pricing formula under the Inter State Gas System Private Limited with Turkmenistan.
The ECC approved in principle Low BTU Gas Pricing Policy for 2012, but subject to concurrence of the Law Division. The summary moved by the Ministry of Petroleum and Natural Resources maintained that this policy will be instrumental in providing sufficient incentives to investors in the field. While formally granting approval, the ECC maintained that before its execution, the Law Division will be approached by the Ministry of Petroleum & Natural Recourse so that its transparency is ensured.
The ECC also decided to reduce sale tax on the manufacturing of agriculture tractors from 16 percent to 5 percent and constituted a group comprising Adviser to PM on Agriculture, Kamal Majidullah and the FBR Chairman to look into procedure for the gradual increase of levy of 5 percent to 16 percent on sales tax on agriculture tractors, in three years.
This subject was thoroughly discussed in the ECC meeting held on December 2011, following which a committee was constituted comprising Special Adviser to PM on Agriculture, Secretary Finance, Secretary Industries and the FBR Chairman. It was subsequently revised by the Cabinet met under the chairmanship of Minister of Kashmir Affairs, Senior Minister for Industries, Special Adviser to PM on Agriculture and representatives from ZTBL, Pakistan Association of Automotive Parts and Manufacturers and Tractor Manufacturers to discuss the impact on revenue on the exchequer after the imposition of the sales tax at the rate of 5 percent.
The committee had unanimously agreed to recommend reduction of sales tax on manufacturing of agriculture tractors from 16 percent to 5 percent and gradually enhance on yearly basis to the standard rate of Sales Tax and ask Zarai Taraqiati Bank Limited (ZTBL) to resume loaning facility to farmers with immediate effect.
While reviewing the sugar situation in the country, the Chairman of the ECC, Dr Abdul Hafeez Sheikh directed the TCP chairman to make the payment to all the millers expediently and ensure that any lapse must be avoided in it, since the payments ultimately goes to farmers. The TCP Chairman informed the ECC that eight millers have been paid off, and rest of the millers will be positively getting payment by the end of this month.
The ECC, before discussing the agenda items, was given a detailed resume of the current economic situation of the country particularly in connection with CPI, SPI, coming cotton and, rice crop, increase in exports, foreign exchange reserves and borrowing from the State Bank, by the Secretary Finance.
The ECC paid tributes to Salman Siddiq for outstanding services as FBR Chairman, who stands retired this month. The minister said that Salman's performance and record in the collection of revenue, as the Chairman of the FBR will be taken as precedent for the other officers in the Revenue and Finance Division.