PTI govt drops its first petrol bomb

ECC gives green signal to privatise PSM

ISLAMABAD: After three days of deliberation, the government on Friday approved an increase in prices of petroleum products by up to nearly 10% and also decided to privatise the Pakistan Steel Mills (PSM) while reversing its earlier politically-motivated decisions.

The Economic Coordination Committee (ECC) of the Cabinet, except for petrol, suggested to fully pass on the increase in prices of all POL products on recommendation of the Oil and Gas Regulatory Authority (Ogra).

In case of petrol, the ECC decided to increase the prices by Rs9.54 per litre, as against Rs14.38 per litre recommended by Ogra, according to the decision.

The decisions were taken by the ECC that met for the first time under the chairmanship of new Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh.

At a time when people are already reeling under skyrocketing inflation, the move to jack up the petroleum products rates ahead of Ramazan may invite public criticism.

The committee decided to reduce the general sales tax on petrol by 5% to 12% to provide relief to the consumers, according to a handout issued by the finance ministry after the ECC meeting.

The reduction entails a revenue loss of around Rs5 billion to the government, it claimed.

The federal cabinet on Tuesday deferred a decision to increase prices of petroleum products and referred the matter to the ECC for review.
Subsequently, the Federal Board of Revenue (FBR) had to drastically reduce the GST rates on all petroleum products with effect from May 1 to May 5.
The GST on all these petroleum products will revert back to the standard 17%, except for petrol. The PTI government's earlier move to keep the prices unchanged by slashing taxes was not appreciated by both the International Monetary Fund and the FBR.

The FBR is already facing over Rs345 billion shortfall in tax collection.
Ogra had calculated an increase of Rs14.38 and Rs4.89 per litre in the prices of petrol and high speed diesel, respectively for the month of May.

The new prices of petrol for May would be Rs108.42 from the current Rs98.88 per litre – reflecting an increase of Rs9.54 per litre or 9.6%.
The price of HSD — most widely consumed petroleum fuel — will increase to Rs122.32 from the current Rs117.43 per litre. The HSD prices have been increased by 4.2%.

The light diesel oil prices would go up from Rs80.54 to Rs86.94 per litre and per litre price of kerosene oil to Rs96.76.

The PSM privatisation

After nearly nine months in power and adding more to the liabilities, the government on Friday finally decided to privatise the PSM.
"The ECC approved the recommendations of the Ministry of Industries and directed that the due process be completed for listing of PSM for privatisation with a view to implement the revival plan based on private sector inputs and collaboration," according to the Ministry of Finance.

Former finance minister Asad Umar was against the privatisation of the state-owned enterprises and wanted to revive them by outsourcing their management.

The industries ministry gave a presentation before the committee on the findings and recommendations of the expert group constituted to work out an operationalisation plan for the revival of PSM.

The ECC approved hiring of technical experts to devise a plan for PSM's privatisation.

An expert group that the Pakistan Tehreek-e-Insaf government had established for making PSM revival plan, estimated the restructuring cost at $1.04 billion that the public exchequer alone could not sustain.
Legally, public-private partnership is like privatisation and under the law and rules of business, the Ministry of Privatisation has the mandate to undertake this exercise.

The privatisation ministry was avoiding taking the responsibility, but the ECC decided otherwise.

Nearly half a dozen investors, including Russian and Chinese, had approached the government with an offer to make the mill profitable.
The ECC also approved the proposal of petroleum division to allocate gas from Thal East, Bhambhra and Thal West Fields to the Sui Southern Gas Company Ltd.

The industries division updated the ECC on the Ramazan Relief Package, saying that the utility stores across the country were being stocked up to cater to the demand of the holy month. The committee also approved supplementary grants and technical supplementary grants for different ministries/divisions. It also approved payment of salaries to Khasadars of South Waziristan.