KARACHI: Gas shortages for industries, especially in winters, will end after installation of third liquefied natural gas (LNG) terminal at the Port Qasim in a year or two, said Sui Southern Gas Company Ltd (SSGCL) managing director Imran Maniar.
Speaking with businessmen at the Karachi Chamber of Commerce and Industry (KCCI) on Thursday,
Mr Maniar admitted that there were difficulties and challenges but the picture is rosy as the activation of the third LNG terminal will certainly help in resolving gas shortage issue being suffered by all types of consumers in Karachi.
Explaining overall gas demand and supply situation, he said a total of 4,000 mmcfd gas including indigenous gas and regasified liquefied natural gas (RLNG) is being used all over the country of which around 950 mmcfd is being provided to SSGCL from indigenous resources in Sindh and Balochistan, while 150 mmcfd of RLNG is also being given to them and the rest of gas is being used by the SNGPL.
According to a KCCI press release, Mr Maniar said SSGCL takes 110 mmcfd from natural resources in Balochistan while the rest of 75 per cent gas comes into the system from resources in Sindh, but these gas reserves are depleting fast at a rate of 10pc per annum, he warned.
The SSGCL takes around 150-180 mmcfd of RLNG from two terminals at Port Qasim, but the supply reduces to 70-80 mmcfd in winters while the demand for gas in Balochistan rises to 120 mmcfd, thus creating an overall shortage of around 195 mmcfd, he said.
To deal with shortages, the government has designed a mechanism in which all the consumers from domestic to industrial have been ranked from top to bottom in which domestic consumers were at the top of the list, followed by export-oriented industry, while CNG stations were at the bottom of the list and non-export industry was above CNG stations, he elaborated.
Mr Maniar said SSGCL carries out load management during winter season exactly as per the government list whereas RLNG supplies to KE are completely cut to zero that helps in covering the gas shortage by 75-80 mmcfd whereas suspension of gas to CNG stations further saves 20 mmcfd that leads to reducing the gas shortfall by 95 mmcfd, out of a total shortfall of 195 mmcfd, he added.
Businessman Group chairman Zubair Motiwala pointed out that the first and foremost problems being faced by gas consumers were the low gas pressure in the industrial zones of Karachi, thus affecting local production and exports.
The data of last one decade indicates that 1,200 mmcfd of gas was available from indigenous resources 10 years ago when the industries were utilising around 385 mmcfd gas and then around seven years ago, a decline to 335 mmcfd was witnessed in the industrial consumption which later on picked up but to date, the maximum industrial consumption was not more than 400 mmcfd, he said.
He was of the view that demand from industries during winter remains intact yet the industries suffer the most which was not a correct approach. The demand for gas rises in Balochistan to 200 mmcfd from around 40 to 50 mmcfd and it also increases in Sindh during winter season. Hence, the gas shortage was not because of rise in demand by the industry but purely due to enhanced consumption by domestic users.
Meanwhile, SSGCL in a press release announced resumption of RLNG supplies from Engro’s LNG terminal.
SSGCL has gradually started supplying gas to K-Electric, FFBQL and Sindh Nooriabad Power Company, in accordance to their respective pre dry docking intakes. The overall gas pressure in Karachi has also improved remarkably, the company said.
Pakistan becomes self-sufficient in mung bean output
ISLAMABAD: Pakistan has become self-sufficient in mung bean production as the first estimate of the crop for 2021-22 records the legume output at 253,000 tonnes against the national requirement of about 180,000 tonnes.
The self-sufficiency in mung bean — a major edible legume in Asia — was announced during the annual review and planning meeting for Rabi 2021-22 on Thursday. The meeting was organised by the Pakistan Agricultural Research Council (PARC) for its Public Sector Development Programme-funded project ‘Promoting Research for Productivity Enhancement in Pulses’.
Minister for National Food Security and Research Syed Fakhr Imam, who attended the annual review meeting, said the government was willing to take steps for promoting production of pulses in the country if strategies like the one adopted by PARC are brainstormed and implemented in letter and spirit. The proposed buyback mechanism will be profitable for the farmers and will certainly entice the farmers to cultivate pulse commodities, he added.
In his presentation on the impact of the project, PARC National Coordinator of Plant Sciences Division Dr Muhammad Mansoor Joyia said the area under mung bean during 2020-21 increased by 35 per cent while production increased by 65pc in Punjab, 6pc in Khyber Pakhtunkhwa and 17pc in Balochistan.
At the same time, cultivation area under mash bean increased by 19pc, while production increased by 27pc in Balochistan. He further explained that the area under chickpea increased by 22pc and production by 23pc. The area under lentil increased by 17.5pc and the production increased in Balochistan by 18pc.
EDITORIAL: Despite its best efforts the PTI government has not been able to get a handle on the ever-rising food prices in the country and food inflation remains a problem that has the prime minister constantly pushing his economic team to address it. Finance Minister Shaukat Tarin, at a presser, announced that the government would provide targeted cash subsidy on four essential food items—wheat, ghee, sugar and pulses—to Ehsaas programme recipients that represent the people below the poverty line. Business Recorder has always underscored the need for targeted subsidies instead of across the board interventions to ensure that the benefit accrues to the poor for whom it is meant and the cost to the exchequer remains limited. He also had acknowledged while briefing the Senate standing committee on finance that food inflation is a major challenge for the government but attributed it to the rise in prices of food commodities in the international market. The international price of ghee, he stated, has risen by 90 percent, pulses’ by 40 percent—items that Pakistan is importing—but added that the numbers indicate that the government is moving in the right direction, citing the example of the rise in auto sales in recent months.
Tarin’s strategy to deal with the issues prevailing in the farm sector are four-fold. First, he has noted that aarthis are catering to the financial needs of the poor farmers from sowing to sale of the produce in the market and are responsible for colluding to raise prices. His remedy is to reduce/end aarthis’ influence through issuing farmers cards, a form of debit card payable by the government and in the medium- and long-term to have the government set up cold storages, commodity warehouses and agriculture malls to curtail the role of the aarthis and end the exploitation of the farmers. However, the actual contribution of a consequent rise in the money supply on inflation is not being considered. It is critical to note that the government’s heavy reliance on borrowing to meet its expenditure has been a source of inflation during the past three years — domestic borrowing has risen from 16.5 trillion rupees in 2018 to over 26 trillion rupees today and this is a highly inflationary policy especially as the bulk of this amount is spent on current as opposed to development expenditure.
Secondly, the incumbent government has continued the flawed agriculture policies of the past wherein sugar was allowed to become a major product, at the cost of cotton, with surplus production requiring an export subsidy as and when the international prices were lower than in Pakistan while collusion ensured that the surplus did not lower the price of sugar. Subsidies to the poor, although necessary, even if and when targeted, are also inflationary as they raise government current expenditure.
Thirdly, oil and products contribute to transport costs of produce from farm to market – and in this context it is relevant to note that the incumbent government, of which Tarin now is an integral part, increased reliance on petroleum levy (PL) over the three years and in this year alone the budgeted revenue from this levy is projected at 610 billion rupees against 450 billion rupees last year. True, that the government has reduced the levy to almost zero on oil imports during the first two months of the year due to political considerations, as international prices have risen, yet it is safe to assume that the pressure to reactivate the levy will rise as and when the government begins to negotiate with the International Monetary Fund on the sixth review scheduled for this month.
And finally, the rupee erosion since May 2021 — from 153 rupees to the dollar to nearly 169 interbank — is feeding into the imports impact on domestic inflation. With reserves at a high of 20 billion dollars, a current account deficit that is not a source of concern, and a real effective exchange rate of around 99 (defined as a weighted average of a country’s currency in relation to a basket of currencies determined by comparing the relative trade balance of a country’s currency against that of each country in the index) the rupee continues to lose value against the dollar even when the dollar dips against other currencies. There is an emerging consensus that perhaps it is part of the strategy for the forthcoming talks with the IMF later this month to retain the 7 percent discount rate and allow the government space to implement its tax enforcing reforms that have yet to be implemented and in the meantime rake in higher tax collection as over 50 percent of FBR revenue is collected from imports and rupee depreciation has a positive impact on tax collections at the import stage because of the higher landed cost in rupees as a result of thereof.
Flour price set to rocket in Punjab amid high wheat price
LAHORE: With the federal government hinting, and the Punjab most probably following, at wheat release price of Rs1,950 per 40kg, the flour price is set to increase by a staggering 22.73 per cent – from the current official price of Rs860 per 20 kilo to Rs1,100.
The new flour price, however, will be 10.57 per cent less than the current market price which had hit Rs1,230 per 20kg because of an exceptional increase in wheat price during the last six weeks: wheat hit at the rate of Rs2,200 per 40kg.
However, if the last official price is something to go by, the increase per 20kg bag will be Rs240. Last year, Punjab had a release price of Rs1,475 per 40kg and had allowed millers to sell a 20kg bag at Rs860 after adding grinding charges of Rs105 per bag. The newly announced price of Rs1,950 per 40kg (or 24.36pc more) is bound to reflect in new price: Rs975 wheat charges, Rs105 grinding charges and Rs20 transportation charges and profit margin) and a market price of around Rs1,100 per 40kg.
“The Punjab had also recommended the same price which Special Assistant to Prime Minister Jamshaid Iqbal Cheema hinted at on Wednesday,” claims an official of the Provincial Food Department.
ISLAMABAD: The Large Scale Manufacturing (LSM) grew by 2.25 per cent in July, reflecting a slowdown in industrial output, data released by the Pakistan Bureau of Statistics (PBS) showed on Wednesday.
The slowdown in the first month of the current financial year is in stark contrast compared to the previous few months when the industrial growth was in double digits with a claim of revival of industrial production after a slump because of a countrywide lockdown due to the Covid-19 pandemic.
In the outgoing financial year, the LSM showed highest growth of 14.85pc and the government claimed that slums in industrial production has come to an end.
On a month-on-month basis, the big industry production contracted by 4.91pc.
Since July 2020, the LSM has rebounded after suffering months of a downturn on account of the Covid-19 pandemic, mainly in the automobile, construction, textile, food, chemicals, non-metallic mineral products and pharmaceutical sectors.
The PBS snapshot of manufacturing activity showed that 11 out of 15 sub-sectors in the LSM rose in July. Low interest rates and reduction in duties on raw materials are expected to further spur economic activities during the current financial year.
The production has witnessed increase in textile, pharmaceuticals, chemicals, automobiles, iron & steel products and fertilisers, while it decreased in non-metallic mineral products, and paper & board.
Sector-wise, production of 11 items under the Oil Companies Advisory Committee fell by 3.57pc year-on-year in July. The 36 items under the Ministry of Industries and Production rose by 1.40pc, while 65 items reported by the provincial bureaus of statistics were up by 5.22pc.
The LSM at 9.73pc of GDP dominates the overall manufacturing sector, accounting for 76.1pc of the sectoral share. It is followed by Small Scale Manufacturing which accounts for 2.12pc of total GDP and 16.6pc sectoral share.
According to the Pakistan Economic Survey 2020-21, despite the issues raised in the ongoing Covid-19 pandemic, the manufacturing sector remained sound and resilient during FY21 on the back of well in time government initiatives.
It further said the government’s thoughtful decision to resume business activities and adoption of smart lockdowns boosted sentiments and the economy gained traction after witnessing a hefty decline in FY20.
As per the PBS data, the entire automobile sector excluding buses showed strong growth in July 2021 compared to the same period from a year ago. Production of tractors rose by 38.35pc, trucks by 10.20pc, jeep and cars by 92.19pc, LCVs by 66.16pc and motorcycles by 8.22pc in July. However, the production of buses declined by 79.59pc.
Cement output also dipped by 10.02pc in July despite the fact that there is a greater demand following the start of construction activities and increase in exports. In the steel sector, billets and ingots also posted a growth of 9.01pc. The production of paints and varnishes declined by 2.14pc and cigarettes by 13.71pc.
In pharmaceuticals, the output of tablets dipped by 24.07pc, injection by 36.53pc, and capsules by 18.39pc. However, the output of syrups is up by 86.67pc.
On the other hand, cooking oil production rebounded and posted a growth of 5.20pc and tea blended by 32.32pc. However, vegetable ghee production fell by10.69pc while wheat and grain milling output dipped by 1.26pc.
The PBS data for April showed that output of petroleum products fell by 3.57pc across the board. The output of two oil products — petrol and high-speed diesel — was up by 1.16pc and 5.29pc, respectively, whereas furnace oil production fell by 15.52pc, kerosene oil 2.09pc.
The production of LPG was up by 11.41pc, followed by lubricating oil 131.39pc, jute batching oil 7.74pc and solvent naphtha by 12.87pc, respectively.
ISLAMABAD: Ignoring the Oil & Gas Regulatory Authority’s (Ogra) workings, the government on Wednesday increased the prices of all the petroleum products by Rs5 to Rs6 per litre with immediate effect for next 15 days to pass on impact of higher international market and currency depreciation.
According to a notification issued by Ministry of Finance, the prices of petrol and high-speed diesel (HSD) were enhanced by Rs5 and Rs5.01 per litre and that of kerosene and light diesel oil (LDO) by Rs5.46 and Rs5.92 per litre, respectively.
As such, ex-depot price of petrol was raised to Rs123.30 per litre from the existing Rs118.30 per litre, up by 4.23pc. Petrol is mostly used in private transport, small vehicles, rickshaws and two-wheelers.
The ex-depot price of HSD was set at Rs120.04 per litre against the existing Rs115.03, an increase of 4.36pc. HSD price is considered highly inflationary as it is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube-wells and threshers.
Likewise, the ex-depot price of kerosene was set at Rs92.26 per litre as against Rs86.80 at present, up by 6.3pc. Kerosene is mostly used by unscrupulous elements for mixing it with petrol and to some extent for lighting in very remote areas.
The ex-depot price of LDO was also increased to Rs90.69 per litre from Rs84.77 per litre, up by 6.98pc. LDO is consumed by flour mills and a couple of power plants.
In its working paper, Ogra had recommended Rs10.5 per litre increase in HSD and Re1 per litre in petrol, Rs5.46 per litre in kerosene and Rs5.92 per litre in LDO. The government, however, shifted partial burden from HSD price by increasing the rate of petroleum levy on petrol to contain inflationary pressure without further impacting its revenue position. It accepted the Ogra’s working on LDO and kerosene.The petrol and HSD are two major products that generate most of revenue for the government because of their massive and yet growing consumption in the country. Average petrol sales are touching 750,000 tonnes per month against the monthly consumption of around 800,000 tonnes of HSD. The sales of kerosene oil and LDO are generally less than 11,000 and 2000 tonnes per month.
Under the revised mechanism, oil prices are revised by the government on a fortnightly basis to pass on international prices published in Platt’s Oilgram instead of previous mechanism of monthly calculations on the basis of import cost of Pakistan State Oil.
The sugar crisis in the country seems to have lingered on for too long. Now the Trading Corporation of Pakistan (TCP) has issued a new international tender to purchase 200,000 tons of sugar from the international market. The TCP has issued a series of purchase tenders in past months to improve local supplies. Last month also the TCP purchased a consignment of 200,000 tons. It is a matter of concern that the country which used to be an exporter of sugar has been facing one crisis of sugar after another for the past three years. Notwithstanding what the government has been claiming, the fact remains that in 2013 the price of sugar was Rs54 a kg which came down to Rs52 a kg in May 2018, just before the PML-N government completed its term. The prices for sugar have been fluctuating regularly and the government has been unable to handle the situation for the benefit of common consumers.
The problem is not intractable if some right policies are developed and implemented. The main issue is the government’s reluctance to take head on the sugar mill owners who have reaped hundreds of billions of rupees in undue profit by manipulating the market. This manipulation works at various levels. First, they force the sugarcane growers to sell their produce at throwaway prices. Then the same sugar-mill owners – many of whom belong to the ruling party – ask for subsidies from the government. The government has doled out billions in such subsidies which have not benefited the consumers. At the third level an artificial crisis is generated when the sugar is not available in the market and consumers spend hours in queues to buy just a couple of kg of the commodity even from Utility Stores. When production falls below consumption level the government rushes to purchase from the international market.
Now sugar is being sold at an exorbitant rate touching Rs115 a kg, whereas just last year the court had fixed the retail price of sugar at Rs85 a kg. For only a couple of days the sugar was available at that price; and since then it has hovered between Rs100 and Rs115 a kg. The new tender seeks rapid delivery with shipment of the first 25,000 tons to be undertaken within two weeks plus voyage time after opening of a letter of credit on the contract. If that does not happen in time, there may be another sugar crisis in the offing and prices may touch as high as Rs150 a kg. This is all disturbing news and the government needs to set its house in order. The top managers in this matter have been issuing conflicting claims and promises but the people of the country have their families to feed; and sugar is an essential commodity. This sugar issue must be tackled on a priority basis and the government must make sure that sugar is available at the price of no more than Rs85 a kg, which will still be more than it was in 2018.
Pakistan’s agricultural woes: The status of our agriculture system is like a ‘dead man walking’
According to the Economic Survey 2019-2020, agriculture contributed around 20 percent to annual GDP and is by far the largest sector to absorb most labour directly and indirectly. It is also the largest raw-material provider to many industries. Successive governments though have not addressed systemic problems faced by the sector, and as such food security of future generations is at stake. This has also negatively affected basic economic fundamentals like increased trade deficit and balance of payments. Because of this neglect, food prices and poverty have soared.
Meaningful macro and micro level interventions by the state have become indispensable to revitalise the agriculture sector, upgrade agriculture systems and increase yields. Subsidies have proved to be least effective to raise agricultural income; instead, the state should develop rural infrastructure, vocational agricultural training institutes and facilitation centers for farmers.
Due to declining agricultural incomes, Pakistan has the highest rate of urbanization in South Asia. The major issue is how to encourage retention of youth in rural areas since rural Pakistanis are entering cities to seek new livelihoods and better basic services. Massive urbanization is destroying the fabric of big cities which are fast becoming hubs of gross inequality and are unlivable for many people.
Way forward & bottlenecks
Various attempts at land reforms and levying tax on agriculture have not borne fruit. We need to contemplate radical structural solutions to these problems.
One innovative solution to these complex issues is to give agriculture the status of an industry. Development of policy reforms and a legal regulatory framework, with a focus on strengthening of public-private partnerships, will be part of the agriculture uplift process.
Such measures will be potential drivers of agriculture development. Big industrial houses will bring in much needed investments, new technologies and quality human resource when they venture into agro-based businesses. Competition will further trigger the rural economy. Apart from crop production, the agriculture sub-sector comprises of raising animals for meat and milk, poultry and fish farming. They will flourish with the induction of corporate culture and professionalism. There is unlimited potential for export as Pakistani animal meat is most sought after in Iran and the Middle East.
The concept being advocated above is akin to “agricultural cluster” which is an advanced type of agricultural industrialization with a proven track record in advancing the specialization of agriculture production and increasing the income of farmers. Prior to execution of such major policy reforms, the farmers, agricultural community and all other stakeholders should be taken into confidence to circumvent reaction as it happened against the Indian government.
The United States, China, Holland, Poland and a couple of other European countries have been beneficiaries of agricultural industrialization.
Our policy makers, legislatures and business leaders need to delve deeper into recommended agricultural innovations highlighted above. We may not be able to change the fate of the agriculture sector and farmers overnight, but steps in the right direction will pay off in the long run.
Muhammad Ijaz-ul-Haq is President of PML-Z and Muhammad Tariq is PPL's former board member, ex-director marketing of Shaukat Khanum Cancer Hospital. The authors are avid followers of international agricultural practices.
ISLAMABAD: Finance Minister Shaukat Tarin on Tuesday announced more than 32 per cent increase in the issue price of wheat — from Rs1,475 to Rs1,950 per 40kg — for release to mills and said the government would provide direct cash subsidy to the vulnerable population on four essential commodities — wheat, sugar, ghee and pulses.
Speaking at a news conference, the minister said the government would also launch this year a trimmed-down Kamyab Pakistan Programme (KPP) to support 4-6 million households. The trade deficit, he said, had increased and could put pressure on balance of payment, but there was nothing to worry about because it was manageable.
One reason for higher trade deficit was $400 million worth of vaccine imports, which had been financed by the Asian Development Bank and World Bank, and hence had net zero impact on trade.
Imports by the automobile sector also put pressure on balance of payment. It was manageable, but if it increased, immediate remedial measures would be taken, he said. Responding to a question about power tariff, Mr Tarin said he did not know if these would go up in October and added that he should not be asked questions about electricity tariff.