The Economic Coordination Committee (ECC) on Tuesday took decisions which did not go down well with the finance ministry.
The government approved the export of wheat to Iran and decided in principle to retender import of liquefied natural gas (LNG). The decisions were taken at an ECC meeting of the Cabinet headed by Finance Minister Dr Abdul Hafeez Shaikh.
ECC has asked the State Bank governor to get the ministry of foreign affairs’ viewpoint on international trade restrictions faced by Iran. The US has threatened it will impose sanctions on countries trading with Iran in an effort to inhibit the latter’s nuclear programme.
In another move which could have far-reaching financial implications on the country, the government approved a framework for short- and long-term import of LNG despite strong opposition by the ministry. According to the ECC summary, the government will restart the entire process of importing the relatively cheap fuel.
The coordination committee has constituted a technical group to further deliberate over the mechanism, bidding details, guarantee matters and legal issues.
The team – comprising secretaries of petroleum, water and power, and finance ministries, Planning Commission and Board of Investment chairmen, and the State Bank of Pakistan’s governor – will present a report at the next ECC meeting.
The finance ministry, however, remains unimpressed. Terming the petroleum ministry’s summary “vague and sketchy”, officials from the ministry said the government will end up being involved in the import process which is bound to raise transparency concerns.
Sources said the finance secretary expressed concern over the government’s move to establish a subsidiary for the import saying that would make the deal a “government affair, but with a private sector tag.”
The government has agreed to provide equity and sovereign bank guarantees for the subsidiary in an effort to back the LNG import.
The decision comes at a time when the Netherlands-based firm 4Gas, developer of the stalled Mashal LNG project, has already threatened to sue the government if it decides to reinitiate the import project from scratch.
4Gas is the successful bidder for developing Mashal LNG project and the contract still remains intact as it has not been revoked by either the Supreme Court or the ECC.
Weekly review of oil prices
In another move bound to irk the finance ministry further, the ECC approved the weekly review of oil prices. The ministry opposed the move saying the current practice of reviewing prices fortnightly was creating an artificial shortage with consumers facing the brunt of the burden.
The decision, however, has been taken on a “trial” basis to assess its impact on oil marketing companies and the general public, stated an official handout.
Other decisions taken at the ECC meeting include approving the import of furnace oil by Pakistan State Oil (PSO) under term contract on 120 days deferred payments. The move is made in wake of circular debt causing the government to default on international payments.
Some analysts say the decision could result in increased cost of power generation and subsequently push up electricity prices.
The ECC also approved capacity payments to four Independent Power Producers (IPPs) worth over Rs700 million, which is likely to put an additional burden on the national kitty.
Published in The Express Tribune, August 8th, 2012.
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The country is falling in darkness & the American agents in the shape of secretaries, finance ministers , PM, president & all politicians are plundering the country with both hands. Those who are opposing Trade with Iran are going to make Pakistan & Iran slaves of America. Unless you punish all of them harshly nothing is going to change for good but for worst. In fact all those who have given votes to all these thieves should be treated with "chitrol" first. I am sure that in Akhrat they will face this treatment.
@question: where does ISI or taleban come into this. please comment on the matter at hand and not the irrelevant issues. wonder what ET moderators are doing
have we taken permission from America ?
when will isi-taliban romance come to an end ? haven't they caused enough damage to Afghanistan and Pakistan
LPG mafia is successful in obstructing the import of LNG for the last 4 years. They are more shrewd than our naive Ministers.
Another stupid decision by stupid people. This would require increased level of inventory planning and management by OMCs in case frequent falls in oil prices that may cause inventory losses, and in case of frequent rise in prices the issue of fuel shortage at petrol pumps will arise.
@Cautious: And yet does not pay taxes. Go figure.
Pakistan is indeed a funny country; the Federal Secretaries are not subject specialist; the Federal Ministers are not subject specialist Yet they take decisions on complex technical issues.No wonder we are in such a mess
Five years in power but still could not decide anything concrete on Electricity and Natural Gas. Shame on PPP.
The Finance Minister is probably the only guy in the room who has a resume that qualifies him for his position and is the only one who has a clue about the economic ramifications of being put on America's blacklist -- yeah lets ignore him.