ECC meeting: Govt cuts age-limit of imports to three years

Withdraws weekly oil pricing mechanism, undecided on new formula.

ISLAMABAD:

In what appears to be a game of electioneering the government hasdecided to reduce the age-limit of second-hand imported cars to three years from the existing five years – a decision reportedly taken on behest of automobile lobby. It has also withdrawn the decision of fixing petroleum products’ prices on a weekly basis.

The decision to this effect was taken here on Thursday in a hurriedly called meeting of the Economic Coordination Committee (ECC) of the Cabinet, headed by Finance Minister Dr Abdul Hafeez Shaikh. The ECC meeting was scheduled for Monday, but the government moved it up, even though most of the ministers were not able to attend, according to the sources in the Cabinet division.

The decision on reduction in the age limit for imports will be effective from December 15, 2012 in order to facilitate the already in process orders of imports. “The decision will help the local assemblers which are facing adverse business conditions due to influx of imports,” said the finance ministry. Previously, the government had raised the age limit while arguing that local manufacturers were fleecing the buyers.

The Ministry of Industries pleaded that due to the previous decision on relaxation in age, brands like Suzuki Swift, Suzuki Mehran, Suzuki Cultus, Honda City, and Toyota Corollas were at risk of being wiped out of the market.

Most of these brands are not locally manufactured but assembled in Pakistan as the sector has failed to implement the deletion plan, protection given by the government to local industry, according to industry experts.

The industrial ministry said that surge in influx of imports had resulted in idle production capacity in the domestic industry, and may affect 200,000 jobs.

OIL PRICING MECHANISM

In line with National Assembly’s resolution to discontinue weekly price adjustment system of the petroleum products, the ECC decided to abandon the weekly pricing mechanism. However, a committee was formed to suggest a practicable mechanism for fixing the prices. An insider said that the ECC may allow fixing of prices on a fortnightly basis in the next meeting.

Moreover, the committee also allowed export of 64,166 tons of sugar, taking the total export quota to 400,000 tons. The decision was taken on assumption of a bumper crop of sugarcane this year. This is in addition to 335,834 tons, already approved in previous meetings.

On the other hand, the ECC also restored agricultural tube-wells subsidy in Balochistan. The number of beneficiary tube-wells’ owners was frozen to the level of 15,660. The decision will be effective from December 1, 2012.

The ECC also waived demurrage charges on the Afghanistan’s transit consignments that arrived during floods and between July 2010 and December 2010.

Wheat support price up 14.3%

In what appears to be a move to appease rural voters, the government increased the wheat support price to Rs1,200 per 40 kilogramme, an increase of 14.3% that according to experts will result in 4% rise in inflation.

It is the fifth increase in the tenure, which has caused a net increase of Rs825 per 40 kg or 182% since 2008. When the Pakistan Peoples Party-led coalition government came into power, the wheat support price was Rs425 per 40 kg.

“After using monetary policy as a political tool to appease industrialists and making budget a ballot budget, the decision to increase the wheat support price is a criminal act by the government,” said Dr Ashfaque Hasan Khan, Dean Business School of National University of Science and Technology. He quoted various studies, including his own, which establishes that a 10% increase in support price results in 3% rise in overall inflation.

While defending the move, the government said that international prices of wheat were much higher which resulted in smuggling of wheat to neighbouring countries. Moreover, prices of inputs have risen substantially during the past year.

Published in The Express Tribune, November 23^rd, 2012.