Pakistan on Wednesday decided to import $221.5 million, or Rs50 billion, worth of wheat and fertiliser to meet its food security needs, as it faced a hard choice either to protect the shrinking foreign exchange reserves or ensure food supplies.
The decision was taken by Finance Minister Miftah Ismail-led Economic Coordination Committee (ECC) of the cabinet, which also agreed to raise electricity prices for K-Electric consumers by Rs1.55 per unit for three months.
The ECC approved import of 300,000 tons of wheat at $404.86 per ton, according to the Ministry of Finance. It added that wheat would be imported on a cost and freight (C&F) basis through the Letter of Credit (LC).
It will cost the national exchequer $121.5 million, or Rs27.4 billion at Wednesday’s exchange rate.
The Trading Corporation of Pakistan (TCP) invited bids on both cash and deferred payment basis due to the depleting foreign exchange reserves. But bidders gave bids of $420 to $493.5 per ton on deferred payment, which was not feasible.
At the price of $404.86 per ton, the per-kg price will come to Rs89, which is better than the previous rates the country paid for import of 500,000 tons of wheat.
The ECC had approved the lowest bid of Vittera BV/ Marine International at $404.86 per ton for 120,000 tons on C&F bulk-at-sight LC basis with the option for other bidders to match the price for a total quantity of 300,000 tons.
The country is facing at least three million tons of wheat shortage and the government has so far taken decisions for the import of 800,000 tons.
The ECC also approved import of 200,000 tons of urea from China on deferred payment. It authorised the TCP to sign agreements for the import of 200,000 tons of urea from Sinochem Fertiliser and CNAMPGC at the negotiated rate of $500 per ton on 90-day deferred payment with mark-up.
The ECC approved the summary subject to the condition that the cabinet would approve a Rs22 billion supplementary grant for the urea import with foreign exchange cover of $100 million, which has not been allocated in the budget for 2022-23.
The country is forced to import the commodities on deferred payments and is bearing interest cost due to the thin foreign currency reserves that stood at $9.7 billion by the end of last week.
The rupee is already taking a hit and has shed Rs15 against the US dollar in just three days in the inter-bank market.
The ECC approved an increase of Rs1.55 per unit in electricity tariff for K-Electric consumers on account of quarterly adjustment for the period October-December 2021. The increase will be passed on to consumers through July-September bills.
The finance ministry stated that the Ministry of Energy presented a summary on tariff rationalisation for the power sector and submitted that in accordance with the National Electricity Policy 2021.
The government may maintain a uniform consumer end-tariff for K-Electric and state-owned distribution companies through the incorporation of direct/ indirect subsidies.
Accordingly, K-Electric’s applicable uniform variable charge is required to be modified to maintain the uniform tariff across the country.
The ECC approved the same tariff rationalisation for K-Electric as for the rest of the country.
The ECC has already approved increase in electricity prices by Rs7.91 per unit but is waiting for final approval of the government.
It has now filed a petition before the National Electric Power Regulatory Authority (Nepra) to allow increase in electricity rates by up to Rs11 per unit for high-end residential consumers across the country to bear the additional burden of consumers with lower consumption
The government has told the regulator that it wanted to increase power rates for consumers of the “unprotected category” using up to 100 units per month by about Rs4.06 per unit instead of Rs7.91 worked out by Nepra, and hence the burden has to be passed on to the higher consumption categories.
It seems that the government has passed the burden of social welfare to the middle class of the country, which will now bear the cost of subsidies for the Rs100 units per month consumption in addition to paying their own bills.
Under the government directive, the base tariff for those consuming 101-200 units would be increased by Rs7.21 per unit in phases to Rs18.95, while the rate for 201-300 units per month would go up by Rs8.31 to Rs22.14 per unit, according to the petition filed by Nepra and reported by Dawn.
The rate for 301-400 units would increase by Rs4.30 per unit to Rs25.53, while the rate for 401-500 units would increase by Rs6.51 per unit to Rs27.74.
Likewise, the base rate for 501-600 units will increase to Rs29.16 per unit, up by Rs7.93, and that of 601-700 units will go up to Rs30.30 per unit, showing an increase of Rs8.97 per unit.
The base tariff for consumption above 700 units per month would go up to Rs35.22 per unit, with an increase of Rs11 per unit. The base rate for time of use (TOU) meters would go up by Rs10.06 to Rs34.39 for peak consumption hours and to Rs28.07 per unit for off-peak hours.
Nepra on Wednesday held the hearing on the government’s petition.
The Ministry of Energy also tabled a summary on the rate of petroleum levy on liquefied petroleum gas (LPG). The ECC returned back the summary to the ministry for reconsideration of the proposal.
Published in The Express Tribune, July 21st, 2022.
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