ECC approves farm grants for flood-hit areas

Published: October 17, 2010

Flood victims are reflected in floodwaters as they fill water from a hand pump while they take refuge with their family on an embankment in a village in Dadu. PHOTO:REUTERS

ISLAMABAD: The government has approved a time-bound financial assistance package for farmers in flood-hit areas, pumping as much as Rs100 billion into the rural economy.

Small farmers – those having less than 25 acres of land – would be eligible for receiving a grant of Rs2,400 per acre with a maximum limit of 12.5 acres, bringing the total benefit to Rs30,000.

An owner of more than 25 acres would be entitled to obtain a concessionary loan at a discounted rate of eight per cent. The federal government would pick up the remaining 5.5 per cent interest rate as the total interest is 13.5 per cent. The State Bank would provide concessionary loans through commercial banks.

The total estimated cost of the package is Rs14 billion equally shared by federal and provincial governments.

The floods have affected an area of 3.3 million acres of cultivated land, according to a joint report by the World Bank and the Asian Development Bank.  “All farmers affected by the floods, irrespective of cultivators or owners, will be eligible for the financial assistance package,” said Finance Secretary Salman Siddique while briefing the media about the ECC decisions. He said the aim was not only to compensate the victims, but also to motivate them and recoup losses incurred in Rabi season.

The package has been offered for a period of four months, which would be operated in consultation with provincial governments.

Salman said the federal government would give a cash grant and would let the provinces decide whether to give cash or provide inputs like seeds and fertilisers. He said Punjab has informed that it would provide a cash grant, while the Khyber-Pakhtunkhwa government wanted help out through commodity transfers. The other two provinces are still working on their mechanisms.

The land determination would be done under Martial Law Regulations of 1972, which uses an equivalence model by virtue of which Sindh’s 61 acres are equivalent to 25 acres in Punjab.

The ECC was divided over the issue increasing wheat support price, hence no decision was taken in this regard. The food ministry had submitted a summary seeking Rs50 per 40 kg increase in wheat support price.

It constituted a committee to work out the actual increase in cultivation cost, an argument presented by the food ministry for seeking the increase.

The finance secretary said the committee, headed by the food minister, would review the production cost worked out by the Agriculture Policy Institute and submit a report within a week. Opponents of the policy said that the domestic cost already exceeded the international prices and any further increase would fuel inflation. Two years ago the government had increased the wheat support price raising it to Rs950 per 40 kg from Rs650.

The body also did not fix the wheat procurement target, which was proposed at 6.5 million tons. The Secretary said that the decision would be taken while considering the storage capacity and availability of commodity financing as the commodity loans have already increased to Rs422 billion.

The ECC rejected a summary seeking permission to export two million metric tons of wheat following the bumper crop last year.

During recent floods, 725,000 metric tons of wheat had been washed away. Last year wheat output was recorded at 23.86 million metric tons in addition to a 4.2 million tons of carryover stock, creating a storage problem for the government.

Thar coal-based package approved

The government also approved Thar coal-focused incentive package by offering a dollar-based rate of return on investment as high as 20.5 per cent. Companies managing financial close by December 2014 would be entitled to claim 20.5 per cent rate of return and ones completing the process by December 2015 can claim a rate of return of 20 per cent.

The package also offers zero per cent customs duty on coal mining equipments and withholding tax exemptions on dividends to shareholders for 30 years. The package offers exemption on withholding tax on procurement of goods and all other levies, including excise duty, special excise duty and workers’ welfare fund. The government has declared the Thar coalfield to be a Special Economic Zone and projects of Thar development as ‘Projects of National Security’.

The ECC could not take a decision on dedicating Kunar-Pasakhi gas field exclusively for power generation because of differences between the ministries of petroleum and water and power. The ECC directed the ministers concerned to resolve their differences.

The ECC also formed a committee on the issue of setting up 1,100-megawatt Kohala hydro power plant in collaboration with China. The committee would also look into the options of whether to go for a government-to-government deal or advertise the project, inviting international bidders aimed at ensuring transparency. The committee would be headed by Minister for Water and Power Raja Pervez Ashraf.

Inland freight margin system gone

The government has also decided to end inland freight margin regime that ensured uniformed prices across the country by passing on the cargo cost to the consumers. However, the new regime would be applicable only after an amendment in the Oil and Gas Regulatory Authority Act and its approval by the cabinet.

In case of its approval by the cabinet, petrol prices would increase from Rs1.5 to Rs3.3 and diesel prices would surge by Rs1.31 to Rs3.5 per litre depending on the distance from ports.  Karachi would be the major beneficiary as petrol prices would drop by approximately Rs2 per litre.

The ECC also approved the establishment of coal and cement terminal plants at Port Qasim. The decision would fetch in Rs14.8 billion ($173 million) investment. The secretary said the government also decided that in future, where no sovereign financial obligation is involved, respective corporations will seek the approval of their board of directors instead of coming to the ECC.

Published in The Express Tribune, October 17th, 2010.

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