ECC approves supply of gas to fertiliser producers

Puts off decision on giving exemption from PPRA rules for import of oil products from Azerbaijan

ISLAMABAD: The federal government on Tuesday allowed the diversion of gas from power plants to fertiliser units in order to ensure availability of a key agricultural input but deferred decision on giving exemption from public procurement rules for the import of petroleum products from Azerbaijan.

Headed by Finance Minister Asad Umar, the Economic Coordination Committee (ECC) of the cabinet decided to ensure continued supply of gas to the urea manufacturing plants. Owing to the shortage of gas, there were difficulties in the provision of energy to these units.

The ECC directed the Ministry of Industries to chalk out a plan for keeping urea plants fully functional throughout the year, according to the ECC’s decision. The step is aimed at ensuring sufficient production of fertiliser to meet farmers’ needs.

Prices of urea have been increased recently due to the hike in gas prices by the government. After that, the government in December 2018 also increased the price of imported urea by 6.3% and fixed it at Rs1,712 per 50kg bag.

Before the increase in gas prices, the local urea manufacturers were selling the 50kg bag at Rs1,610, which they have now increased to Rs1,740.

The ECC also put off decision on providing cash assistance to Pakistan Machine Tool Factory, asking the Ministry of Industries to prepare a strategy first for revitalising the sick unit. It approved allocation of up to 25 mmcfd of additional gas from the Adhi field to Sui Northern Gas Pipelines Limited (SNGPL) for meeting existing demand.

The ECC deferred decision on giving exemption from Public Procurement Regulatory Authority (PPRA) rules of 2004 for buying petroleum commodities from Azerbaijan.

It instructed the PPRA - an attached department of the Finance Division - to give, in writing, that it did not have objections to the proposed arrangement.

The Petroleum Division had sought exemption from PPRA rules for a petroleum product purchase deal with Azerbaijan on a government-to-government basis, initiated by the previous Pakistan Muslim League-Nawaz (PML-N) government.

The Petroleum Division, in its proposal, stated that Pakistan was currently facing a severe shortage of energy, which was not only causing hardships for the people but was also inhibiting economic growth of the country.

In November 2016, the then cabinet approved a summary for signing an inter-governmental agreement (IGA) between Azerbaijan and the government of Pakistan on cooperation in the field of energy. That included cooperation for the development of supply and trading opportunities for crude oil, oil products, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), joint construction of terminals and storage of LNG, LPG and other hydrocarbons.

The signing ceremony of the IGA was held at the Prime Minister’s Office in February 2017. Accordingly, Pakistan State Oil (PSO) negotiated a term sale and purchase agreement for petroleum products with Azerbaijan’s Socar under the umbrella of IGA.

PSO board of directors has already approved the term sale and purchase agreement for its execution subject to approval of the ECC by invoking Rule 5 of PPRA Rules 2004.

The ECC also approved guidelines for the export of half a million tons of wheat products. In November 2018, the ECC decided to export surplus wheat/products of the public sector.

The Ministry of National Food Security and Research suggested that provincial governments and Passco should process the export of wheat by placing tenders for the surplus of 500,000 tons.

The successful bidder will provide a performance guarantee of 120% of the difference between the issue price of wheat (to flour mills) and the bid price, which may be released on the submission of export documents within 90 days.

The export of wheat and wheat products should be completed before April 30, 2019 while the export process should be completed by June 30, 2019 in order to facilitate exporters in completing necessary formalities. 

Published in The Express Tribune, January 2^nd, 2019.

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