ECC approves Rs50b package for farm sector

Allows local manufacturing of mobile phones; discusses retrenchment of all PSM employees

Shahbaz Rana May 14, 2020

ISLAMABAD: The federal government on Wednesday approved Rs50 billion relief package for agriculture sector and also discussed a proposal to terminate over 9,000 employees of the Pakistan Steel Mill, which has remained closed for last five years.

The Economic Coordination Committee (ECC) of the cabinet also approved, in principle, the local manufacturing of mobile phones after it was warned that India could spy on Pakistani citizens through handsets being manufactured in India but shown as manufactured by a third-country.

The ECC in its meeting on Wednesday approved Rs50 billion agriculture package proposed by the Ministry of National Food Security and Research. The ministry had recommended Rs56.6 billion package but the ECC directed for restricting it to the limit set in the Prime Minister’s Economic Relief package.

The ECC asked the ministry to rationalise the package as per its share in the overall Rs100 package announced for the SMEs and the agriculture sector, the finance ministry. The government has already approved a Rs50 billion package for the SMEs to provide indirect cash flow support to nearly 3.5 million people through pre-paid electricity.

The agriculture package has been offered to provide subsidy on fertilisers to the farmers, reduction in bank mark-up on agriculture loans, subsidy on cotton seed and white fly pesticides, and subsidy on sales tax on locally-manufactured light tractors.

The food ministry recommended Rs37 billion subsidy to farmers on the purchase of fertilisers. The amount would include a subsidy of Rs925 per bag on DAP and other phosphatic fertilisers and Rs243 per bag of urea and other nitrogenic fertilisers.

The ECC was informed that the estimated offtake of urea would be around 3.04 million tonnes and 0.95 million tonnes of DAP for the Kharif season. The subsidy scheme will be implemented by the provinces and the amount will be disbursed through scratch card scheme already being implemented by Punjab.

The ECC was told that the fertiliser share in the cost of production of major crops was around 10 to 15% and the provision of subsidy would reduce the cost and increase the farmers’ affordability and help them use the recommended levels of fertiliser nutrients and the best agricultural management practices.

The ministry had proposed Rs8.8 billion for picking up to 10% of interest cost of loans being obtained by the small farmers. This Rs8.8 billion allocation is likely to cut down in the light of the ECC’s observations.

The ECC approved Rs2.3 billion subsidy on cotton seed and Rs6 billion for white fly pesticides. The package would also include Rs 2.5 billion subsidy on sales tax on the locally-manufactured light tractors for a period of one year. The food ministry had proposed the abolition of 5% sales tax on light tractors.

The ECC directed to include other banks along with the ZTBL in the scheme to enhance outreach of the farmers with focus on subsistence farmers with a land holding of 12.5 acres, the finance ministry said.

The ECC also called for the implementation mechanism, especially through the scratch card system, to be monitored carefully to ensure that the actual beneficiaries of the package were the genuine farmers.

Retrenchment in PSM

The ECC discussed in details the issue of retrenchment of all the 9,350 employees of the PSM who have been receiving salaries despite the country’s largest industrial unit remained closed since June 2015.

Neither the PML-N had nor the PTI government has a plan to revive the mill as long as it is in the public sector. The PML-N government had shut the PSM in June 2015, and since then the employees are getting salaries but with a significant lag. The retiring employees are also not paid their retirement benefits.

“The ECC also took up a proposal by the ministry of industries and production regarding the human resource rationalisation of workforce of the Pakistan Steel Mills at a cost of Rs18.74 billion to be paid for retirements and termination dues of over 8,000 of 9,000 PSM employees”, the finance ministry said.

“The ECC discussed the proposal in detail and asked the ministry of industries and production to re-work the scheme in consultation with the PSM management to extend its scope to a maximum number of PSM employees and bring it back to ECC,” it added.

On April 15, the PSM Board of Directors had approved the plan to retrench over 8,000 employees of the PSM and give them monetary benefits. But the ECC argued that there was no justification for retaining the remaining employees when the mills remained closed.

The monthly salary bill of the PSM employees is Rs350 million and since June 2013 the federal government has given Rs34 billion subsidy to pay these salaries. The Supreme Court has also directed the government to find a solution to the PSM issue.

The ECC was informed that average age of the PSM employees was 47 years against private sector’s average of 36 years. It heard that 48% of the PSM employees were between the age group of 51 to 60 years, which, the ministry said, was a hurdle in its privatisation.

The privatisation ministry and the finance ministry have endorsed the plan to terminate the employees. The privatisation ministry has also hired financial adviser for due diligence of the PSM but the process remains incomplete. The PSM management has not yet given the latest audited financial statements of the mills to the privatisation ministry, which is delaying the finalisation of the report.

Phone manufacturing

The ECC also discussed the mobile devices manufacturing policy with the objectives of technology acquisition and localisation of the mobile devices.

The ECC discussed various components of the policy and approved it in principle with instructions to the industries ministry to further fine-tune its various features and incentives for the promotion of localisation and research and development leading to export of mobile phones.

“The country faces serious security threat as there is growing concern of Indian-manufactured smartphones, using other countries’ Type Allocation Code within the initial eight-digit portion of the 15-digit International Mobile Equipment Identity use to uniquely identify wireless devices,” said the summary prepared by information technology ministry.

It may be technically very difficult for the Pakistani authorities to identify and restrict the import of Indian assembled/manufactured smartphones with other countries’ IMEI numbers, it added.

Samsung is currently operating world’s largest mobile handset factory in India.

The ECC also approved disbursement of the special relief package for the people living along the Line of Control in a single instalment of Rs12,000 for six months from January 1 to June 30. From July onwards, the LoC families would be given monthly instalment of Rs2,000 each till December 31, 2020.

The ECC approved a proposal from the Defence Division for technical supplementary grant of Rs16.6 billion to meet the expenses on the POL, utilities and medical stores maintained by the defence services.

The ECC also considered and approved a proposal by the national food security ministry for release of 35,000 metric tonnes of wheat from the PASSCO to the Azad Kashmir government at a cost of Rs1.52 billion, including the cost of wheat and incidental charges. Half of the amount would be paid by the federal government from the stimulus package announced to fight against Covid-19.