• Import of wheat thru TCP, G2G, private sector allowed
• Wheat MSP fixed at Rs 1,800 per 40kg
ISLAMABAD: Minister for Finance and Revenue Hammad Azhar stated on Wednesday that the government has decided to open import of sugar and cotton from India for the benefit of the public and small and medium enterprises (SMEs), saying that “sugar is 15 to 20 percent cheaper in India compared to Pakistan.”
The finance minister, a day after assuming the charge of the Finance Ministry and after chairing a meeting of the Economic Coordination Committee (ECC) of the Cabinet, in his first media briefing, acknowledged the challenge of price hike and other economic challenges and stated that he was aware of the heavy responsibility assigned to him as the betterment of the people and employment opportunities are directly associated with the improvement of the economy.”
The minister said he would continue to seek guidance from his predecessors “Asad Umar and Dr Hafeez Shaikh, on economic matters.”
Azhar said that both his predecessors had worked harder for the stability of the economy.
The government has decided to reduce the petrol price by Rs1.50 and diesel price by Rs3 because there is some space, the minister added.
The finance minister said that as the price of sugar has been considerably less in neighboring India compared to Pakistan, the ECC of the Cabinet meeting earlier presided over by him had decided to open trade of sugar and allowed the private sector to import 0.5 million tons of this essential commodity from India.
The minister further stated that as there existed a huge demand for cotton subsequent to increase in exports and cotton produced by the country was not sufficient to cater the demand, the ECC decided on a proposal moved by the Ministry of Commerce that import of cotton would also be opened from India till end June 2021.
Azhar said the decision was taken to facilitate Small and Medium Enterprises (SMEs) as big industries can afford to import from any country but the shortage was affecting the small and medium enterprises.
“The government would work day and night to control the increase in the prices stoked by the Covid, and wherever federal and provincial government interventions would be required, it would be done in effective coordination to tame inflation. We are fully aware of the pain people have been going through due to the increase in the prices of ghee, wheat flour and other essential items,” he added.
The ECC decided to fix the minimum wheat support price at Rs1,800, he added.
He added: “Going forward the government is fully aware of the people’s expectations as well as of the economic challenges and stabilization, and LSM growth so far achieved would be taken ahead in a better way, while at the same time trying to fulfill people’s expectations to deal with prices.”
He said he was also in contact with the International Monetary Fund (IMF), adding that $500 million disbursed by the Fund and $2.5 billion raised through Eurobonds would be a healthy addition to the foreign exchange reserves.
“The government has to make sometimes difficult decisions, but the welfare of Pakistan and the common man would be the focal point of its every decision,” he said.
Azhar said “the issuance of US$2.5 billion Eurobonds has been a great success as over five billion bids have been received with over 100 percent subscription.”
The country received a relatively better price compared to the bonds launched by some other countries on the same day, he added.
The minister said: “even though the current account and the primary deficit have been turned into a surplus, but he would like to speak about the changes that have taken place in the State Bank of Pakistan (SBP) reserves as when the present government came to power, the total SBP reserves were of around US$8 to US$9 billion with major portion consisted of swaps – borrowed money.”
According to him, the present government added US$ 8 to 9 billion to SBP reserves, excluding a $6 to $7 billion swaps, since it came to power in 2018.
The minister said the rupee is now in a “stable zone” and the SBP was given autonomy. According to him, the central bank cannot be compelled by the federal government to increase discount rates or inject dollars to maintain rupee-dollar parity at a specific level as was the case during the previous government.
Replying to questions, the finance minister said the government has allowed the import of sugar and cotton to benefit the poor SMEs as prices of sugar in India are 15 to 20 percent less as compared to Pakistan.
He said the SBP amendment bill was prepared keeping in view the best international practices and the government would take the proposed legislation to the parliament “with an open mind and heart.”
“Suggestions of the parliament for improvement would be incorporated and even if revision is necessary it would be made,” he added.
The finance minister said the government would also issue Sukuk bonds; however, no date has so far been finalised.
“We are working with the entire department to make the subsidy targeted. We have got better rate compared to those given by the syndicate of the banks and there is no impact of finance minister removal of its rate. We are optimistic about PSM bidding this year,” he said, adding that he was holding weekly meetings with the Privatisation Commission on the issue.
“We are trying to comply with the three FATF actions by June 2021,” he said, adding “if the Covid is managed properly then growth in the next fiscal year will be better and the SBP has revised this year’s projection based on the LSM growth.”
The present government has been working against rent-seeking and cartels, and the work is still in progress, he said, adding that “these cartels are well entrenched and the present government will take them to reform.”
Reuters adds: "If opening trade with some country lessens burden on the pocket of an ordinary person, there is no harm in it," Azhar told a news conference in Islamabad. "The price of sugar in our neighbour India is quite a bit lower than Pakistan."
The trade is open until June 30 for local private sector to import the sugar while cotton and cotton yarns could be brought in by both the private companies and Pakistan's government bodies.
New Delhi is yet to make any comment on the decision.
Pakistan was one of the leading buyers of Indian cotton until 2019, when Islamabad banned imports of goods from India after New Delhi revoked the special status of its portion of the Kashmir region that both countries claim.
Pakistani buyers have already started making inquiries about buying Indian sugar and cotton, which is being offered at lower prices than supplies from other countries, five dealers said.
India is the world's biggest producer of cotton and the second biggest sugar producer. Exports to its neighbour will reduce surpluses that are weighing on its local markets, while helping Pakistan to lower soaring sugar prices ahead of Ramazan.
The push comes amid a gradual thawing in ties between the two neighbours. The militaries of both countries released a rare joint statement last month, announcing a ceasefire along a disputed border in Kashmir. "Inquiries for sugar and cotton are going on for price checking," said the India head of a global trading firm, who declined to be identified due to company policy. Pakistan has been looking to tap the international market for sugar, floating two tenders for 50,000 tonnes in the last month. It rejected bids on both tenders in March.
The first tender offer was priced at $540.10 per tonne on a cost and freight basis (C&F) and the second at $544.10 tonne, European traders said.
India is offering sugar at a discount compared to supplies from Thailand, a dealer with global trading firm said.
"Pakistani traders have been buying Indian sugar through their offices in Dubai for Afghanistan. If Pakistan allows imports from India, they will unload shipments in Pakistan," the dealer said.
Traders say they have been offering Indian white sugar at $410 to $420 a tonne on a free-on-board (FOB) basis, far lower than the domestic price of $694 quoted in Pakistan.
Indian exporters could also ship via sea or land, the dealer said, noting this gives them a big edge given tight global container shipping markets.
"Indian cotton would be at least 4 to 5 cent per pound cheaper for Pakistan than supplies from other countries," said Arun Sekhsaria, managing director of exporter D.D. Cotton.
Not everyone welcomed the move. The chairman of the Cotton Ginners Forum in Pakistan, Ishan-ul-Haque, said an unlimited import of cotton and yarn from India would affect the country's agriculture and cotton industry.
Given the expected arrival of the new cotton crop in June, he said there should be a limit on imports so price stability could be ensured. Earlier, a meeting of the Economic Coordination Committee (ECC) has allowed import of three million metric tons (MMT) of wheat through the Trading Corporation of Pakistan (TCP), government to government and private sector to meet the requirements of local consumers and build strategic reserves.
The meeting of the ECC presided over by the Minister for Finance and Revenue, Hammad Azhar, on Wednesday approved the revision of Minimum Support Price (MSP) of wheat crop 2020-21 at the rate of Rs1800 per 40Kg.
The Committee also approved the wheat procurement targets of PASSCO and Provincial Food Departments.
Import of 3 MMT of wheat through Trading Corporation of Pakistan/GTG/Private Sector was also allowed to meet the requirements of local consumers and build strategic reserves.
The ECC considered and approved the summary moved by Petroleum Division regarding reduced gasoline tariff of PARCO’s Mehmoodkot-Faisalabad-Machike (MFM) pipeline @ 85 percent of the prevalent railway tariff.
The ECC meeting also approved the registration of Pakistan’s “Pink Rock Salt” as Geographical Indications (GI) with Pakistan Mineral Development Corporation (PMDC) to be notified as “Registrant”. Registration of Pink Salt as a GI of Pakistan will promote and enhance national and international trade, stimulate global demand and attract premium price for Pakistan.
The ECC also considered and approved the summary presented by the Ministry of Commerce regarding amendment in the Export Policy Order 2020 to waive the condition of Minimum Export Price for single-use surgical instruments marked with appropriate and internationally recognized symbols/color schemes to indicate “single-use items”.
The product has to be certified by Sialkot Material Testing Lab (SIMTEL) on the basis of physical/ chemical tests. The ECC also considered and approved the Addendum/Amendment to security package document of 660 KV HVDC Matiari-Lahore Transmission Line Project as proposed by the Power Division.
On recommendation of the Ministry of Industries and Production, the ECC approved the issuance of Government Guarantee required against L/C facility of Rs2,522 million, extended by the National Bank of Pakistan to Pakistan Steel Mills.
The ECC deferred the decision on Strategic Trade Policy Framework (STPF) 2020-25; however, approved the formation of the National Export Development Board (NEDB) as requested by the Ministry of Commerce to facilitate economic outreach initiatives.
The Finance Ministry stated that the ECC allowed the commercial import of white sugar from India up to 500,000 MT till 30-6-2021 through land and sea routes, on the basis of quota issued by the Ministry of Commerce. The decision will be time and cost effective and would also stabilize the prices of sugar in the domestic markets, according to the ministry.
In order to boost the value-added exports in the textile sector, the ECC allowed the import of cotton and cotton yarns from India to bridge the gap between demand and supply of the raw materials, required to maintain the surge of exports especially in the textile sector. The import will be allowed through land and sea routes till June 30th 2021, until the arrival of the new cotton crop, the ministry added.
The ECC approved technical supplementary grants; (i) Rs630.808 million for the Federal Ministry of Education and Professional Training for the project titled “Establishment & Operation of Basic Education Community Schools”; (ii) Rs370.762 million for the Ministry of Federal Education and Professional Training for meeting expenditure related to various Educational Institutions/Area Education Offices;(iii) Rs600 million for “Award of Allama Muhammad Iqbal 3000 Scholarships to students from Afghanistan” by the Higher Education Commission (HEC); (iv) Rs128.7 million for the Ministry of Housing and Works for execution of development Schemes in the Sindh Province; (v) Rs2 billion for Prime Minister’s Low Cost Housing Scheme; (vi)Rs450 million for construction of new building of Supreme Court, Branch Registry at Karachi; (vii) Rs1.2 billion for Pakistan Atomic Energy Commission; (viii) Rs22.59 million for the Ministry of National Food Security and Research for making payments pending under wheat freight subsidy scheme 2016-17; (ix) Rs49.189 million for the Privatization Commission for meeting various operational expenses; (x) Rs50 million to the Ministry of Energy for execution of gas development schemes in the Sindh Province; (xi) Rs50 million to HEC for payment of educational expense of 90 Afghan students enrolled under project titled “Award of 3000 Scholarships to Students from Afghanistan under PM Directives”.
Copyright Business Recorder, 2021