ISLAMABAD: In a surprising development which could have political ramifications, the government on Thursday decided to block reduction in wheat and wheat flour prices and increased commissions for oil companies and petroleum dealers on the sale of oil products.

The decisions were taken in a meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Ishaq Dar. It also approved incentives to attract private sector investment in transmission lines of the power sector.

Informed sources said that due to higher support price for wheat, the rate of Pakistani produce was much higher when compared with international market prices that have been in decline for a few weeks now. The support price has increased from Rs425 per 40kg in 2008 to Rs1,200 per 40kg this year, an increase of about 180 per cent in five years.

Raises commissions on petroleum products sale

As a result, some traders started importing wheat at lower rates than domestic prices, creating unrest among farmers and the policy makers. Therefore, the government decided to discourage wheat imports.

According to an official statement, “The ECC taking cognisance of the rising trend of wheat imports despite a very good crop at home accorded approval for levy of 20pc regulatory duty on import of wheat with immediate effect.”

OIL COMMISSIONS: The committee also decided to increase the commission for oil companies and their dealers by up to 26pc on the sale of petroleum products. The decision was not made public and would be silently implemented through adjustment in the oil prices on Friday.

An official said consumers would not notice less than a rupee per litre increase in commissions of the two segments — oil companies and dealers — since the government has introduced huge cuts in petroleum prices. He said the existing rates of commission were last increased in February 2013 and investors required to be compensated against operation and maintenance expenses and inflation.

He said the government raised margins for oil marketing companies (OMCs) on petrol by 12 paisa per litre to Rs2.35 per litre from Rs2.23, an increase of 5.4pc. The OMC margin on High Speed Diesel (HSD) has also been jacked up by 49 paisa per litre, or 26pc, to Rs2.35 per litre from Rs1.86.

For petroleum dealers, the sale commission was increased by 30 paisa each on both diesel and petrol. As a consequence, the dealer commission was jacked up from Rs2.78 per litre to Rs3.08 on petrol, an increase of 11pc.

Likewise, the dealer commission on diesel was increased by 13pc to Rs2.60 per litre from Rs2.30.

The ECC also approved Government Guarantee for Rs12-billion loans to PIA so that the national flag carrier could meet its critical requirements. Terms and conditions of the loans will be determined in consultation with the Ministry of Finance.

POWER SECTOR: The ECC considered the draft Policy Framework for Private Sector Transmission Line Projects of the Water and Power Ministry and approved exemption for 10 years from corporate tax, turnover tax and withholding tax on income to attract private investment in transmission lines.

It, however, ordered that investors would be required to file tax returns while withholding on GST on imports will be leviable and adjustable. It was decided that Nepra will finalise tariff petition within a month for transmission lines without re-opening of tariff obtained through international competitive bidding.

The committee approved a proposal of the power ministry to extend grace period by another two years for syndicated terms finance facility of Rs136.45bn obtained to finance circular debt through Power Holding (Pvt) Ltd of the power ministry.

The meeting also allowed revival of some rental power plants proposed by the power ministry to generate power at gas field site on an interim gas supply basis.

The decision aims at interim utilisation of over 200 million cubic feet per day (mmcfd) of natural gas available at various fields which cannot be injected into the pipeline system in the near future due to the time requirement for establishment of gas production.

The petroleum ministry would provide details of the gas available with other specifications.

TEXTILE PACKAGE: The ECC discussed the draft Textile Policy in detail and sought improvements in various proposals given in the draft. The finance minister directed that a committee headed by Minister for Planning and Development Ahsan Iqbal and Minister for Food Security Sikndar Hayat Bosan, Minister for Textile Senator Abbas Khan and senior representative of the Ministry of Finance as members to review the draft policy till Nov 15 after which it would be placed before the ECC for reconsideration.

The ECC also approved the restructuring of Pakistan Central Cotton Committee (PCCC) with the assurance from the textile ministry that establishment of the headquarters of the committee in Multan would not require any government funding. The textile ministry was asked to submit its business plan to services rules and regulation wing of the finance ministry for clearance.

Published in Dawn, October 31st, 2014