ECC waives up to 10% import duties

Diverts Rs11.7b from Covid-related budget for constructing hospitals in Punjab

Shahbaz Rana April 15, 2021
The ECC was informed that this year the cotton production is estimated at 7.7 million bales and the country needs to import up to six million bales. PHOTO: PID


The government on Wednesday approved to divert Rs11.7 billion from Covid-19 related budget for construction of hospitals in Punjab amid its inability to lay an infrastructure to cope with the growing patients of the respiratory disease.

The Economic Coordination Committee (ECC) of the cabinet allowed diverting Rs11.7 billion from Covid-19 budget for mother and child care hospitals. The ECC also waived up to 10% import duties to reduce the cost of cotton yarn import after the government could not develop a national consensus to allow cheaper imports from India.

“The ECC also approved a technical supplementary grant for the Finance Division amounting to Rs11.7 billion as the share of the federal government for the establishment of four mother and child hospitals in Punjab,” said the Ministry of Finance. These hospitals will be set up in Attock, Layyah, Rajanpur and Sialkot with a total cost of Rs23.4 billion.

However, the money has been taken from the Rs70 billion Covid-19 Responsive and Other Natural Calamities Programme. The ECC approved to divert Rs11.7 billion from Covid programme towards grant 166 that deals with the “other development expenditures”.

In December last year, the Central Development Working Party (CDWP) had approved the Rs70 billion umbrella Covid-19 plan. Under the plan, projects costing up to Rs50 million and of short gestation period of up to one year had been planned to be initiated.

The Rs70 billion programme had been conceived to provide support for provinces to mitigate the impact of the deadly respiratory disease.

Now the money has been given for other projects despite the health infrastructure facing acute pressure due to growing numbers of coronavirus cases in the country.

Cotton import duties

The ECC waived up to 10% import duties to facilitate the import of cotton yarn. The Ministry of Commerce presented a summary before the ECC for withdrawal of customs duty on import of cotton yarns till June 30, 2021.

The committee approved the withdrawal of customs duty to ensure smooth supply of cotton and cotton yarns to the value-added industry, while bridging the gap between domestic production and overall demand for the inputs, said the finance ministry. The revenue loss is estimated at Rs340 million for three months period.

Earlier, the ECC had allowed import of cotton from India but the cabinet did not ratify the decision.

Pakistan has been importing around three million cotton bales every year, as its consumption estimated around 12 to 17 million bales is far higher than the domestic production.

The ECC was informed that this year the cotton production is estimated at 7.7 million bales and the country needs to import up to six million bales this year. About 3.1 million bales have already been imported and the country needs to import another 2.9 million bales.

India is the largest producer of the cotton. Finance Minister Hammad Azhar had defended the decision of importing cotton from India and said that there was a high demand for it because of 15% less prices. The ECC also approved a monthly production plan for purchasing electricity from three LNG-fired power plants.

The government has already approved to make amendments in the Power Purchase Agreement(s) (PPA) & Gas Supply Agreement(s) (GSA) of three RLNG based Public Sector Power Plants namely Quaid-e-Azam Thermal Power Plant, Balloki Power Plant and Haveli Bahadur Shah Power Plant. These amendments would envisage submission of a Monthly Production Plan (MPP) as binding on the power purchaser and the power seller wherein the power purchaser shall be entitled to submit demand requirement as needed, at least 75 days before the start of each such month, which will be finalised by the system operator and operating committee under the PPA.

The concept of a Monthly Delivery Plan (MDP) for deliveries of gas under the GSA, has been paired with the monthly schedule as provided under PPA. The MPP will come into effect from the year 2022.

Two of these power plants are on the active list of privatisation but the government has not yet been able to remove the obstacles. National Power Parks Management Company Limited (NPPMCL), which owns 1,230-megawatt Haveli Bahadur Shah and 1,223MW Balloki power plants, is the only notable entity on the government’s privatisation list.

The government expects minimum proceeds of Rs300 billion or around $1.5 billion from the sale of these two plants. It had initially planned to sell the company by June 2019.

The key issue was whether the new buyer of NPPMCL would be entitled to income tax exemption like the other private sector power plant owners and whether the prospective buyer would have to pay Rs8.5 billion to the Federal Board of Revenue (FBR) after the change of debt-to-equity ratio of the company had not been resolved till last month.

The other problem was that the cost of debt that the buyer would take to acquire the company is expected to be higher than permitted by the power sector regulator to be charged from the consumers.

The Power Division also presented another summary proposing amendment to the Facilitation Agreement and Amendment to the GoP Guarantee Agreement with KAPCO. It included the proposal that the project may be withdrawn from the Privatization Commission and entrusted to Private Power and Infrastructure Board (PPIB). After due deliberation, the committee approved the summary, in principle, subject to formal vetting by the Law Division.

Published in The Express Tribune, April 15th, 2021.

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