The government has on Tuesday turned down a proposal seeking the lifting of a ban imposed on import of Compressed Natural Gas (CNG) cylinders and conversion kits: upholding its policy of discouraging the use of natural gas as fuel in vehicles.
A decision to this effect was taken here in a meeting of the Economic Coordination Committee (ECC) of the Cabinet – the country’s highest economic decision making forum – headed by Finance Minister Dr Abdul Hafeez Shaikh.
The Ministry of Petroleum and Natural Resources had proposed lifting the ban on the import of CNG cylinders and conversion kits.
It had also proposed that the import of parts and components of CNG kits may be allowed for export-oriented businesses dealing in CNG conversion kits. According to an official handout, the ECC has asked the petroleum ministry to provide further data on the revenue earned by export of locally manufactured CNG kits.
Failures and faults in the revenue collection apparatus also echoed in the ECC, as repeated compromises on merit in the appointment of individuals at senior positions in the Federal Board of Revenue (FBR) has started affecting the authority’s efforts. The government already faces a massive revenue shortfall in the first two months of the new fiscal year, jeopardising budgetary projections for the year.
The finance ministry raised the issue of the huge shortfall in tax collection, and sought a reply from FBR Chairman Ali Arshad Hakeem. However, the FBR chairman could not give a satisfactory reply but gave reassurances that the situation will improve by end of this month.
According to a summary tabled by the FBR, the authority collected Rs106.7 billion in taxes in July – Rs5.6 billion or 5% less than the collection made in July 2011. The FBR did not inform the ECC of the collection made in August. Reports suggest the FBR bagged Rs126 billion in August, but there has as yet been no official confirmation. The total collection target for the first two months was Rs292 billion. According to media reports, the FBR is facing a Rs58-80 billion revenue shortfall.
Officials talking to The Express Tribune admitted that political appointments in the authority have started impacting revenue collection. They said that with the current management, it will be very difficult to achieve the Rs2.381 trillion tax target. Already in the last fiscal year, the FBR almost missed its revenue target by Rs71 billion, resulting into lesser transfers to provinces.
On another summary, the ECC also waived inland transportation charges for the export of 30,000 tons of sugar to Tajikistan on a government-to-government basis. The government is selling the commodity at a price $20 per ton below the international market price on August 13, 2012. The ECC has also approved procurement of an additional quantity of 10,000 tons of sugar, over and above the approved quantity of 200,000 tons by the Trading Corporation of Pakistan.
The petroleum secretary informed the ECC that currently 93% of HSD consumption in the country was being imported by Pakistan State Oil (PSO), while 7% was being produced in local oil refineries. The PSO import price and local refinery prices do not match and fluctuate, which has created problems for small oil marketing companies (OMCs) which depend entirely on local refinery supply due to capacity and infrastructure constraints in importing the fuel.
The price of locally produced HSD is higher most of the time; consequently, smaller OMCs market HSD at the cost of their margins. After these revelations, the ECC also allowed de-regularisation of the ex-refinery price of High Speed Diesel (HSD).
Published in The Express Tribune, September 5th, 2012.
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