ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Wednesday allowed the export of 225,000 tons of sugar while ignoring serious objections raised by some ministers over the adverse impacts of the decision on domestic consumers.
It also approved the issuance of Rs54.5 billion sovereign guarantees in favour of the State Bank of Pakistan (SBP) in order to back an arrangement that allows the central bank to acquire preferential shares in Zarai Taraqiati Bank Limited (ZTBL).
The ECC also extended the reduced rate of 0.4% on banking transactions valuing over Rs50,000 a day by non-filers of income tax returns till March 2017. The standard rate is 0.6%, which the government has lowered under pressure of traders.
The ECC decided to allow export of 225,000 tons of sugar from the surplus available after ascertaining that there would be 1.23 million metric tons of surplus sugar available in the country, according to a handout issued by the Ministry of Finance.
However, some members of the ECC opposed the decision because it would push the prices of the commodity up in the domestic market, as has been the case in the past many months. These members of the ECC were of the view that due to the earlier decision to allow the export of sugar, prices of the commodity significantly increased, said sources in the finance ministry. They also argued that the government could not play its role to check the prices.
Sugar is being traded in the open market in the range of Rs65 to Rs70 per kilogramme, depending upon the quality and the market. Early this year, prices were in the range of Rs55 per kg.
The meeting was informed that the federal government’s decision to change the mode of tax collection on sugar also increased the prices of the commodity by roughly Rs2 per kg. In fiscal year 2016-17 budget, the government changed the mode of tax collection from federal excise duty to general sales tax.
In order to address the concerns of the ministers, ECC Chairman, Finance Minister Ishaq Dar, directed that the Ministry of Commerce should keep an eye on sugar prices.
“The ECC decided that the Ministry of Commerce should ensure that there are adequate checks and balances available to maintain price stability in the domestic market at the current level,” said the finance ministry. It added in case the domestic price stability is disturbed, commerce ministry would bring a summary to consider cancelling the export permission to sugar exporters.
Unlike previous years, it was decided that there will be no freight and export rebate payable by the government to sugar exporters on such exports. Furthermore, only those mills will be allowed to export that have cleared outstanding dues of farmers relating to the last season and have started crushing at full capacity, according to the ECC.
The federal and provincial governments do not have effective mechanisms to check prices after abolishment of the magistracy systems in the country.
The best way to check the sugar prices is that the government should fix the ex-factory and retail prices of the commodity, said Iskandar Khan, Senior Vice Chairman of Pakistan Sugar Mills Association. He said that at present the ex-factory price was Rs55 per kg, the government was charging Rs4 per kg tax and the retailer was earning roughly Rs7 per kg profit.
The ECC approved issuance of Rs54.46 billion worth sovereign guarantees in favour of SBP for extending the same amount of loan to the ZTBL. The SBP has converted its Rs54.5 billion debt into redeemable preference shares, which will carry 7.5% interest rate per annum. After ten years, the SBP will have an option to redeem its debt or convert it into equity.
The Board of Directors of the ZTBL in their meeting held in February this year approved this arrangement.
The ECC also allocated additional around 50 mmcfd available gas from Habib Rahi Limestone (HRL) reservoir to Thermal Power Station Guddu (TPSG/GENCO-II) subject to installation of compression plant by TPSG/GENCO-II. It allocated additional 26 mmcfd available gas from HRL reservoir to Engro Fertilizer Ltd’s old plant.
courtesy : tribune