Reserves will go past $10b by March end, govt plans

The $2.84 billion reserves are sufficient to finance only three weeks of imports, as the country’s monthly import bill rose to $4.2 billion in January. CRETAIVE COMMONS

ISLAMABAD: As the country’s foreign currency reserves plunged to dangerously low levels of $7.6 billion, the federal government vowed to increase the reserves to $10 billion by the end of next month, a target that appears unrealistic in the backdrop of drying foreign inflows.

According to figures released by State Bank of Pakistan (SBP) on Thursday, the country’s total liquid reserves stood at $7.59 billion as of February 7, the lowest level in years. Out of the total reserves, the foreign currency reserves held by SBP dropped to $2.841 billion, the central bank said. Reserves held by commercial banks stood at $4.748 billion, according to the SBP.

Net official reserves have turned out to be negative, if the government’s liabilities on account of China currency swap, forward contracts and China deposits are subtracted from the reserves held by the SBP.

The $2.84 billion reserves are sufficient to finance only three weeks of imports, as the country’s monthly import bill rose to $4.2 billion in January.

Due to the grave situation, Finance Minister Ishaq Dar held a review meeting to find ways to improve the delicate reserves position. A meeting to review the overall economy with a focus on external financing was held at the Ministry of Finance, according to an official handout.

Dar gave instructions to accelerate the pace of efforts already being made by the Finance Division to improve the reserves position, it added.

The handout stated that the foreign exchange reserves will be increased to more than $10 billion by the end of March, 2014. It further added that the gross reserves will be increased to $16 billion by the end of December, 2014.

The government was betting on a plan to shore up its reserves by floating Euro bonds next month, the officials added. They said the government would soon launch road shows to gauge the market appetite before issuing the bond next month.

According to analysts, the government was undermining the cost that it has to pay to raise the money from the international market. The government’s expectation was that it will be able to float the bond close to premium on bonds that the Musharraf government had floated in 2007. The ten-year bond was traded at around 7% to 7.5%.

Analysts said the international investors’ perception about the country’s future roadmap will determine the premium the country will have to pay for raising the money.

The ministry said that International Financial Institutions have reposed their confidence in the government’s policies and said that the economy was now moving in the right direction.

Tackling manipulation: Govt officials scupper plans to empower oil regulator

Though Ogra keeps a check on petroleum product prices, it lacks powers under the ordinance and any company or individual can go to court if action is taken against forming a cartel, overpricing or any other market manipulation. PHOTO: FILE

ISLAMABAD: 

The civil bureaucracy and the ruling elite have blocked attempts aimed at empowering the oil and gas industry regulator to slap fines and penalties on oil marketing companies (OMCs) for allegedly forming a cartel to charge higher prices and pocket billions from consumers.

The move came after the Cabinet Division tabled a summary before the Economic Coordination Committee (ECC), seeking approval of amendments to the Ogra ordinance in order to allow the regulator to monitor prices of all refined oil products, sources said.

Finance Secretary Dr Waqar Masood, Science and Technology Minister Zahid Hamid, some other ECC members and top bureaucrats joined hands and scuppered plans to push through the amendments. The changes in the law would have permitted the regulator to impose fines and penalties on the OMCs for alleged tampering with the deregulated oil pricing mechanism.

Bureaucrats and some ministers argued that the Oil and Gas Regulatory Authority (Ogra) was already monitoring prices of petroleum products and there was no need to revise the law. Any such amendment would spoil the investment environment in the oil industry, they pointed out.

At present, Ogra only regulates the kerosene oil price whereas other petroleum products are deregulated and their prices are set keeping in view the rates at which these are imported by Pakistan State Oil.

Though Ogra keeps a check on petroleum product prices, it lacks powers under the ordinance and any company or individual can go to court if action is taken against forming a cartel, overpricing or any other market manipulation.

In the meeting, some of the ECC members, who were in favour of amending the Ogra ordinance, suggested that after the proposed changes, the government would frame rules to clear the way for taking action against the OMCs for any misappropriation.

According to sources, they stressed that Ogra was not legally empowered to monitor petroleum prices and could not take action to protect the interest of consumers. In such a scenario, amendments to the ordinance were required to empower the regulator.

Petroleum and Natural Resources Minister Shahid Khaqan Abbasi also backed the proposal, they said.

However, considering the concerns raised by different quarters, the ECC decided to constitute a committee led by the minister of science and technology with secretaries of the ministries of law and justice and finance and Ogra as members.

The committee will consider afresh the proposed and other amendments, if any, to the Ogra ordinance before sending them to the ECC for approval and subsequent placement before the Council of Common Interests (CCI) for a final decision.

Sigh of relief: Power companies escape turnover tax again

The size of the balance sheets of power distribution companies is big enough to give billions of rupees to the FBR in a year. PHOTO: FILE

ISLAMABAD: 

The federal government has exempted power distribution companies from 1% turnover tax for one more year, providing relief to electricity consumers, but the decision may annoy the International Monetary Fund (IMF) that is advocating withdrawal of all tax exemptions.

Despite resistance by the Federal Board of Revenue (FBR), the Ministry of Water and Power sought a five-year extension in exemption from the minimum turnover tax. However, due to the FBR’s opposition, the ECC gave only a one-year extension, according to officials of the Ministry of Finance.

The ECC, which met here on Thursday, decided to constitute a committee comprising secretaries of the Ministry of Finance, Water and Power and FBR chairman to work on modalities for the extension, said a handout issued by the Ministry of Finance.

Based on the premise that the National Electric Power Regulatory Authority (Nepra) had determined tariff “directly” for the current year and, secondly, the burden should not be passed on to the consumers, the ECC decided to grant a year’s extension, it said.

Nepra set the tariff without taking into account the minimum turnover tax, which would keep power prices lower to the extent of the tax value.

The Ministry of Water and Power, which is the parent ministry of all state-owned power distribution companies, had insisted on the tax exemption, citing the “very weak” financial position of the distribution companies.

In 2008, the previous government had given a five-year exemption, which ended in June 2013. All the power distribution and transmission companies are sustaining heavy losses because of unchecked theft, line losses due to obsolete infrastructure and low recovery of bills. But the size of their balance sheets is too big, enough to give billions of rupees to the FBR in a year.

Under Section 113 of the Income Tax Ordinance of 2001, the FBR charges 1% tax on gross turnover of a company that is suffering from losses. If a company is profitable, it pays 35% income tax.

Under the constitution, income tax can be charged only when an entity or an individual is earning profit. But over the years, the FBR has imposed turnover tax to increase its revenues.

“The minimum turnover tax is nothing but a semi-direct tax,” remarked Ashfaq Tola, a renowned tax expert.

FBR Chairman Tariq Bajwa opposed the tax exemption during the ECC meeting, according to the officials. He reminded ECC Chairman Ishaq Dar, who is also the finance minister, Pakistan had committed to the IMF that it would not issue any new Statutory Regulatory Order (SRO) to give tax concessions. SRO is a legal instrument used to make changes to the law.

Under an agreement with the IMF, the government has completed an assessment to determine the exact size of tax exemptions. The FBR has estimated the exemptions at over Rs500 billion annually.

In a recent interview to The Express Tribune, Jeffery Franks, the IMF’s Washington-based mission chief to Pakistan, said the government had committed to implementing a plan to do away with the tax exemptions from the new fiscal year starting July.

Sugar export

The ECC turned down a request of the Ministry of Commerce to increase the ceiling set for sugar export and said the millers should first exhaust the existing limit of 400,000 tons.

Since the PML-N government allowed the export of sugar, prices of the commodity have increased by Rs5 per kg in the domestic market.

The ECC showed its dissatisfaction over the incomplete work done by the Ministry of Planning, Development and Reforms on import and distribution of fertiliser.

It constituted a sub-committee, led by the minister of planning and development, which would review jurisdictional placement of different federal government organisations after the devolution (post-18th Amendment) for review on professional lines, focusing on synergy, improved governance and coordination.

Farmers go for tunnel technology to improve productivity

Low tunnels are less expensive compared to high tunnels and cost Rs30,000 per acre. PHOTO: FILE

FAISALABAD: Farmers of the country are increasingly adopting state-of-the-art tunnel technology that offers five times more profit and productivity against traditional methods of farming, improves livelihood of local communities and ensures food security in the country, agricultural experts say.

“In Pakistan, lack of cold storages, high cost of production and outdated agriculture infrastructure have slashed profit margins of the farmers over the years. Now, with the help of tunnel farming, they are getting handsome returns by growing off-season crops in a controlled atmosphere,” an expert told The Express Tribune.

In tunnel farms, growers can have more plantations per acre by using hybrid seeds, pesticides, balanced fertilisers and irrigation. As a result, plants receive a smooth flow of nutrients and produce a good-quality product.

This new farming method has reduced the need for Indian vegetables as it provides off-season vegetables to the consumers, which were earlier imported from India.

“Cucumber, cauliflower, strawberry, cabbage, melon and watermelon are the major fruits and vegetables produced through tunnel farming to cater to the demand during all four seasons,” said Asif Ali Warraich, a tunnel farmer.

Tunnel technology had cleared the way for bringing radical changes to the agriculture sector, enabling the growers to plant off-season crops and improve their economic condition, he added. “With traditional methods, we had not been able to even meet the production cost,” he claimed.

Elaborating, Warraich said three types of tunnel farming – low tunnels, walk-in tunnels and high tunnels – were going on in Pakistan, adding the farmers installed the tunnel infrastructure according to their financial capacity.

Low tunnels are less expensive compared to high tunnels and cost Rs30,000 per acre. Soil preparation, spraying and picking is difficult in this type of tunnel. Mostly, small farmers opt for low tunnels.

Walk-in tunnels give a better yield compared to low tunnels, but have a higher infrastructure cost of Rs120,000 per acre.

High tunnels give maximum yield and make soil preparation, spraying and picking easier because of their width and height. They cost Rs600,000 per acre for installing the infrastructure. Mostly, big land owners invest in such tunnels.

Farmers say they are happy with the production of off-season vegetables and the good return on investment. They have set up the tunnels without seeking financial support from the government.

Agriculture is the mainstay of Pakistan’s economy that contributes 21% to the gross domestic product. If the government offers incentives to the farmers, the potential of agriculture sector could be much higher.

Japanese carmaker Toyota announces recall of 1.9 million Prius hybrid cars

The Japanese auto maker confirmed Wednesday it was recalling a total of 1.9 million Prius hybrid cars worldwide because of a fault that could cause the vehicles to slow down or stop completely.

The company added the decision to recall the eco-friendly cars was taken after problems with the software controlling a power converter were found.

'Because in the worst case the car could stop while driving we do consider this a potential safety issue and that's the reason why we are implementing this recall,' Toyota said in a statement.

Green, but unsafe?

The carmaker said no incidents had yet been reported as a result of the defect, saying it was purely a precautionary measure after 400 cases were reported, most of them in Japan.

Toyota said the recall affected 997,000 vehicles in Japan, 713,000 in North America with the remainder spread across Europe, the Middle East and China.

The company had already recalled Prius cars in 2010 and 2013 for a variety of faults. The model is the world's first mass-produced gasoline-electric hybrid car.

Big jump in China exports puzzles analysts

The General Administration of Customs reported Wednesday China's trade surplus rose by 14 percent in January compared with the same month a year earlier and rebounding from a decline in December.

It said exports jumped far more than expected, increasing by 10.6 percent to $207.13 billion (151.81 billion euros), while imports climbed by 10 percent to $175.27 billion.

The strong export figures surprised many economists, with some suggesting they were driven by disguised capital flows instead of real demand.

Serious doubts

'We find this strong level of export growth puzzling,' Nomura International analyst Zhang Zhiwei said in a statement, adding it was unclear to what extent it indicated the true strength of China's economy.

'While this could reflect an improving external demand, we suspect that export over-invoicing activities have reemerged,' ANZ bank experts Liu Li-Gang and Zhou Hao commented.

January's trade results came after China's economy logged flat growth of 7.7 percent throughout 2013, maintaining its slowest expansion of gross domestic product in more than a decade.

Australian police seized about 180 million Australian dollars ($162 million) worth of meth

SYDNEY: Australian police seized about 180 million Australian dollars ($162 million) worth of methamphetamine hidden inside kayaks shipped from China, officials said Wednesday.

Five people were arrested in Sydney on Tuesday after customs officials discovered 183 kilograms (403 pounds) of meth last week while inspecting a shipment of kayaks from China, the Australian Federal Police said.

Nineteen of 27 kayaks in the shipment had bags of meth stuffed inside the watertight areas of the boats, said Tim Fitzgerald, regional director for the Australian Customs and Border Protection Service.

Four of the five people arrested are from Taiwan, and one is from Sydney. Two were charged with attempting to import drugs, and the others were charged with possessing a commercial quantity of drugs.

They each face a maximum of life in prison if convicted. (AP)a