The Cabinet’s Economic Coordination Committee (ECC) has decided to lift the import ban on all items other than completely built units (CBUs) of automobile, mobile, and home appliances and to permit the import of 200,000 metric tonnes of wheat.
The increase in petroleum dealers’ margin from Rs4.90 per litre and Rs4.13 per litre, respectively, to Rs7 per litre was also approved at the meeting chaired by Finance Minister Miftah Ismail.
The Pakistan Petroleum Dealers Association (PPDA), according to sources, has asked the government for an immediate revision of their margins due to inflation, increases in staff salaries and utility costs, etc.
They have asked that the margins be revised to Rs6.90 per litre including 15 per cent profit (effectively Rs7.94 per litre). The PPDA then used the media to announce a nationwide strike that would begin on July 18, 2022, with the demand that their margins be increased to 6 per cent of the current selling price (effectively, Rs13.81 per litre for MS and Rs4.16 per litre for HSD).
On the orders of the prime minister, Musadik Malik, the minister of state for petroleum, and Shahid Khaqan Abbasi, the former minister for petroleum, immediately began communication with the PPDA. On July 16 and 17, 2022, several rounds of negotiations took place in Karachi.
During negotiations, the Secretary of Petroleum and the Chairman of OGRA both remained present. The PPDA changed its position during negotiations and requested that the margins be raised to Rs9.23 and Rs9.46/litre on MS and HSD, respectively, with immediate effect.
The negotiating team acknowledged that a dealer with daily sales of less than 200,000 litres cannot operate the business profitably on current margins, and that such losses serve as a motivator for dishonest behaviour.
After lengthy negotiations, the PPDA finally agreed to margins of Rs7 per litre for both MS and HSD. Based on this agreement and the promise that the revised margins will take effect in August 2022, the PPDA cancelled its call for a strike on July 18, 2022.
The commitment made to the dealers in November 2021 is still less than this agreed-upon margin (4.4 per cent of sales price).
The 4th international wheat tender for 2022, which was announced and opened on July 25, has prompted the Ministry of National Food Security and Research to ask for urgent advice. The Trading Corporation of Pakistan (TCP) issued its fourth tender on May 19, 2022, in order to secure 200,000 metric tonnes of imported wheat on a CFR basis, it was announced at the meeting.
The ECC has approved the direct payment of $11.6 million as compensation/goodwill to the company M/s China Gezhouba Group International Engineering Co. Ltd (CGGC) through the Ministry of Foreign Affairs in response to a proposal from the Ministry of Water Resources for a compensation package for the Chinese casualties at the Dasu Hydro Power project.
The ECC determined that the compensation/goodwill package’s amount, which is US$ 11.6 million, will remain the same as per the ECC’s earlier decision from January 21, 2022.
it also approved the proposal to switch both the Fatima Fertilizer (Sheikhupura Plant) and Agritech plants to domestic gas on a summary moved by the Ministry of Industries and Production.
According to the ministry, RLNG is provided to both SNGPL-based plants on a cost-sharing basis, and the gas rate for running these plants is calculated using a variable contribution margin (VCM).
Both plants have asked the Ministry to revise the VCM and cap the GST at the price paid by the plants due to rising fuel prices and other factors. The proposal to switch both plants to domestic gas was approved by the ECC following discussion in accordance with the Federal Cabinet’s and ECC’s earlier decision.
The Ministry of Petroleum, Ministry of Finance, Ministry of Food Security, and Ministry of Industries & Production were further instructed by the ECC to determine the gas price/VCM for the fertilisers The ECC also decided that sales tax could be applied to the actual gas cost that the company is paying.
The Ministry of Commerce also provided a summary stating that the Cabinet approved the ban on the import of approximately 33 classes/categories of goods in order to reduce the current account deficit (CAD), which was on the rise.
The decision caused an overall decrease in imports of the prohibited goods of over 69 per cent, or from $399.4 million to $123.9 million. Due to serious concerns expressed by significant trading partners regarding the imposition of the ban and taking into account the fact that the ban has had an impact on supply chains and the domestic retail industry, a review meeting was also held to review the ban after two months.
The government’s ongoing efforts have resulted in a significant decrease in imports, so the ECC decided to lift the ban on imported goods other than auto, mobile, and home appliance CBUs.
Additionally, all held-up shipments (aside from those that still fall under the banned category) that arrived at the ports after July 1, 2022, may be cleared with the payment of a 25 per cent surcharge.
