• Orders third-party audit of Rs2.7bn spent on SCO event
• Clears circular debt plan, POL supply deal with Azerbaijan
ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Monday was surprised to note up to 83 per cent increase in prices of pulses and chicken despite all the favourable factors at home and abroad, but approved a plan for increasing electricity rates to charge another Rs36 billion to consumers.
A meeting of the ECC presided over by Finance Minister Muhammad Aurangzeb also ordered a third-party audit of Rs2.7bn claimed by city managers for the beautification of Islamabad for a recent SCO summit and also allowed the signing of a sale purchase agreement between Pakistan State Oil and Socar of Azerbaijan for preferential oil trade pending for almost seven years.
Informed sources said some cabinet members lamented that the government’s claims of single-digit inflation meant nothing for the people who did not witness prices of essential items like pulses, chicken and sugar going down.
Economic Adviser (Ministry of Finance) Dr Imtiaz Ahmad told the meeting that increasing pulses and chicken prices was totally unjustified as all contributing factors moved in the right direction.
He said the prices of pulses, on average, went up by 50pc over the last five months while global prices went down by 2.7pc, petrol and diesel prices dropped by 8-9pc, transport costs reduced by 3.5pc, and the exchange rate improved by 7pc.
He said the Sensitive Price Index increase for the week ending Nov was due to an 83pc surge in gram pulse rate to Rs414 per kg against Rs226 in the same period last year. Mash Pulse also became expensive by almost 3-4pc despite a 9pc reduction in its global price and all the above factors.
The economic adviser also pointed out that chicken rates had increased by 15pc in a year despite an almost 6pc reduction in imported chicken feed and 15pc drop in the soybean rate that resulted in a 2-3pc decrease in local feed on top of the improvement in the exchange rate and ease in fuel and transport costs. Chicken live bird rate was reported at Rs388 per kg on average on Oct 31 compared to Rs345 last year.
Petroleum Minister Dr Musadik Malik believed that the only understandable factors were hoarding and cartelisation, and a select group benefitted from poor regulatory and administrative controls. This was partially reinforced when Commissioner Islamabad reported that importers of all pulses were based in Faisalabad, who set prices not only for Islamabad but almost the entire Punjab and even KP.
Circular debt
The Power Division told the meeting that the power sector faced “multifarious challenges” mainly the circular debt (CD) that stood at Rs2.393 trillion at the end of FY24 and accentuated the already constrained supply of electricity and slowed down economic growth.
It reported that because of massive tariff hikes, the circulated debt flow was negative Rs27bn for FY22 and Rs57bn for FY23. “For FY24, the CD flow was Rs83bn owing to low recoveries, line losses above regulatory targets, pending generation cost, markups, etc”.
The Power Division said that in consultation with the regulator, a new iteration for forecasting the power purchase price, accounting for 85-90pc of total power sector revenue requirement, had been put in place for FY25. Its alignment of the Circular Debt Management Plan (CDMP) committed to the IMF with the latest forecast was a continuous process for accurate monitoring.
The revised CDMP, without any intervention, entailed circular debt flow estimated at Rs1.077tr, which would be mitigated to the extent of Rs36bn during the current year “through timely tariff increases, improvement in losses and fiscal support”. The government has committed a budget allocation of Rs1.229tr for the current year with the IMF. “The ECC approved the plan, which aims to reduce liabilities in the power sector and enhance financial sustainability”, the meeting was told.
The Ministry of Industries and Production brought forward a summary on the Peshawar High Court’s direction, asking the ECC to reconsider its decision on exporting sugar from Khyber Pakhtunkhwa. The ministry reported that based on national data, the sugar production in KP was less than the province’s annual consumption of 0.979m tonnes. The local deficit was usually met by sugar supplied from surplus-producing provinces such as Punjab and Sindh.
However, a statement said that the request and suggestions from the province of KP were duly noted.
Refuses grant for SCO
The ECC did not allow Rs632m supplementary grants demanded by the information ministry for so-called ‘crucial digital initiatives’ and outstanding dues spent on the SCO summit and asked to re-appropriate its budget allocations and then come back for any shortfall later. A similar directive was also given to the interior ministry, which sought a Rs650.35m supplementary grant for the repair of security cameras on the occasion of the SCO event.
The ECC approved the transfer of Rs152m from housing and works to the Supreme Court of Pakistan for its buildings.
Published in Dawn, November 5th, 2024
