Inside Financial Markets

ECC allows 185,000 tonnes of urea import for Rabi

ureaECC allows 185,000 tonnes of urea import for Rabi

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Friday allowed import of 185,000 tonnes of fertiliser from Saudi Arabia and ordered improved natural gas supply to domestic plants to meet additional fertiliser requirement of 415,000 tonnes through indigenous resources.

The meeting presided over by Finance Minister Ishaq Dar rejected a proposal for cheap gas to Tuwairqi Steel Mills, a Saudi and Korean joint venture, involving Rs5 billion annual subsidy and increased the bailout package for Pakistan Steel Mills (PSM) from Rs18.5bn to Rs19.02bn, an increase of Rs529m.

The ministry of industries and production had suggested to the committee that the country would be facing urea shortfall of 600,000 tonnes during upcoming Rabi season 2014-15 as the production units in the country were not working to full capacity due to gas shortage.

Rejects summary for provision of gas at concessional rates to Tuwairqi Steel

The finance minister said all stakeholders should focus on urea production at home to meet local requirement to avoid foreign exchange expenditure on a product that can be produced at home.

He asked the ministry of petroleum and natural resources to ensure provision of gas to fertiliser units in coming winter and beyond.

The ministry of industries was also asked to come up with a comprehensive plan, giving proper proposals for meeting the fertiliser requirements and putting an end to the practice of unnecessary imports, leading to wastage of precious foreign exchange. This he believed could be made through timely projections and adjustment in gas allocations.

The meeting decided to import 185,000 tonnes of urea through due process of Saudi Basic Industries Corporation (SABIC) facility. For the remaining requirement of 415,000 tonnes, the ministries of industries and production were asked to work out a plan and submit before the next ECC meeting for approval.

The committee also took up another summary moved by the ministry of industries for provision of natural gas as feed stock in the direct reduction of iron (DRI) process to Tuwairqi Steel Mills on concessional rates to the tune of Rs5bn per annum for the next five years. The sponsors of Tuwariqi from Saudi Arabia and Korea had offered the government 7 per cent equity in the project.

Finance minister Dar, however, insisted on Friday that “there was no justification for the government to extend preferential treatment to any party and there was no room for providing a huge subsidy to the company concerned.” He asked secretary industries and production to submit a realistic proposal, complete in all respects with proper recommendations that could be considered in future meeting of the ECC.

The meeting also deferred the matter regarding approval of Draft Energy Purchase Agreement (EPA) and Draft Implementation Agreement (IA) prepared for Biomass based projects on IPP mode, submitted by the ministry of water and power. The finance minister was of the view that there was no room for approving the advocated cost plus formula, rather it should be re-drafted on the basis of upfront tariff that could be considered by the ECC in its next meeting.

The ECC did not agree to the proposal of the industries ministry to provide Rs529m worth of tax exemptions to PSM. Instead, the ECC enhanced the financial package of PSM by Rs529m to cover the expenses on five per cent duty on import of iron ore.

The minister said the government was determined to put an end to SRO culture and therefore no exemption was being allowed and instead the financial package to PSM be enhanced. He said the FBR had already approved proposals for facilitation to PSM, allowing three-month time for deferred payment of GST as well as exemption from payment of advance income tax on imported raw material to help its cash flow in view of their accumulated tax losses till date.

The meeting noted with satisfaction that with a financial package approved by ECC few months ago for PSM, it has reached around 30pc capacity utilisation level from mere three per cent few months back.


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

Add comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The Canadian Securities Institute


CSI is part of Moody's Analytics Learning Solutions, which offers educational programs and credentials throughout the world.

Email Newsletter

Subscribe to receive inspiration, news, and ideas in your inbox.

Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)