On Monday, the Economic Coordination Committee (ECC) of the Cabinet officially authorized an Rs100 billion package of electricity subsidies for five export sectors and postponed a decision to set the minimum support price (MSP) of wheat for the 2022–2023 growing season.
In addition, the meeting, chaired by Finance Minister Ishaq Dar, approved more than Rs410 million for security preparations in advance of the PTI’s planned march to the federal capital and loosened rules for wheat importation through the Gwadar port despite slightly higher freight costs of Rs9,000 to Rs10,500 per tonne.
According to a statement released by the Ministry of Finance, the ECC approved the continuation of the regionally competitive electricity tariff (RCET) at Rs19.99 per kWh, all-inclusive, to five export-oriented sectors throughout Pakistan: textile (including jute), leather, carpet, surgical, and sports goods.
After textile exporters notified the closure of units due to the non-implementation of the cabinet’s August decision for the provision of power to export industries at nine cents a unit in FY23, Mr. Dar had confirmed last week the continuation of cheaper electricity for five export sectors.
The exporters and the finance minister decided to change the pricing from nine cents per unit at the time’s exchange rate to Rs19.99 per unit in local currency.
The RCET was committed by Prime Minister Shehbaz Sharif and former Finance Minister Miftah Ismail and executed for a few months, but due to additional fiscal difficulties, it was said to have ended on October 1.
The RCET, according to the Ministry of Commerce, enabled Pakistan’s industry reach historically high exports of around $32 billion in 2021–2022 despite the effects of the Covid-19 pandemic and significant economic difficulties.
A statement from the Ministry of National Food Security and Research (MNFSR), which aimed to set the minimum support price (MSP) of wheat at Rs3,000 or Rs3,200 per 40kg for 2022–2023, was postponed during this time.
It stated that if the MPS was set at Rs3,000, farmers would receive a 20 percent profit margin and a 28 percent profit margin if set at Rs3,200.
The ministry emphasised that while Sindh had set an MSP of Rs. 4,000, all other recommendations ranged from Rs. 2,600 to 3,000 based on an estimated Rs. 2,500 production cost.
It was stated that the MSP for Sindh will result in a variety of problems, such as food inflation, hoarding, smuggling, and market distortion. The consumer price index was predicted to increase by 2.86 percent at Rs4,000 a tonne as opposed to 1.27 percent and 1.6 percent at Rs3,000 and Rs3,200, respectively.
In accordance with a mandate from the Prime Minister’s Office to strengthen the financial position of Gwadar port, the MNFSR presented a new summary to be taken into consideration while considering bids to utilise the port of Gwadar and revisions to the pre-shipment inspection agency’s procedure.
The authorities had previously offered three to four shipments of wheat, each weighing 40,000 tonnes, through the port of Gwadar, but the bids they received were on the expensive side.
The heightened risks brought on by a change in the inspection system and port were disclosed to the ECC as the cause of the higher bids. These modifications involved switching the port from Karachi to Gwadar and implementing shipping inspections at both the loading port and the discharge port. The MNFSR suggested that pre-shipment at the load port should be sufficient and that both prerequisites should be postponed temporarily.
The recommendation to temporarily drop both revisions to the Trading Corporation of Pakistan (TCP) tender inspection was subsequently approved by the ECC.
