ECC approves wheat imports from Russia.
300,000 metric tonnes of wheat will be sold by a Russian state-owned enterprise for $372 per metric tonne.
The first state-level import agreement with Moscow in the previous two years, Pakistan on Monday approved signing a government-to-government agreement worth $112 million for the import of 300,000 metric tonnes of wheat from a Russian state firm.
The government came up with an interim solution to put up a meager Rs4 billion monthly fund since it was unable to resolve the long-standing issue of opening a bank revolving account to spare the Chinese energy businesses from the circular debt.
These choices on the purchase of wheat and the establishment of an energy fund in lieu of a revolving bank account were made by the Economic Cooperation Committee (ECC) of the Cabinet.
A few hours before leaving for China, Finance Minister Ishaq Dar presided over the ECC meeting.
The 300,000 metric tonnes of wheat will be sold by M/s Prodintorg, a state-owned business of the Russian government, for $372 per metric tonne, which is $1 less than the previous agreement Pakistan made with a private bidder. Wheat will be somewhat more expensive than local production at a Pakistani port, costing $387 per tonne or Rs89.2 per kilogram.
Pakistan had already rejected Russia’s offer to deliver 120,000 metric tonnes of wheat at a cost of $399.50 in August of this year, requesting a further 2.4% drop in the tariff due to the declining global commodity prices. Prodintorg has also made the proposal in accordance with the G2G agreements.
The last time, Pakistan entered into a government-to-government agreement and bought 1,000,000 metric tonnes of wheat from Russia in July 2020.
The product will be supplied by M/s Prodintorg between November 2022 and January 15, 2023. The ECC was notified by the Trading Corporation of Pakistan that M/s Prodintorg is not a company that has received international recognition. Due to the fact that Russia and Ukraine continue to be the two largest exporters of wheat in the world, the West has removed grain exports from its list of prohibited goods.
The TCP was permitted to import 3 million tonnes of wheat by the ECC in May 2022. The actual gap would be 2.6 million tonnes rather than 3 million tonnes, according to further verification of public wheat supplies.
Out of the remaining 1.6 million tonnes of wheat, the ECC has also approved the importation of 800,000 tonnes through an open tender and on a government-to-government basis this week. Before the new crop is harvested, the wheat needs to be imported.
The Ministry of National Food Security had just three days earlier told the ECC that attempts to purchase wheat from Russia under a G2G agreement had failed.
Wheat inventories at Pakistan Agriculture Storage and Services Corporation (Passco) are 3.5 million tonnes, but they will go negative if extra provincial demand is not fulfilled without further imports.
1.67 million tonnes of wheat have already been imported into Pakistan through contracts or approval, and about one million tonnes of wheat have already arrived.
power fund
According to the finance ministry, the Ministry of Energy provided a synopsis of the Pakistan Energy Revolving Fund (PERF) before the ECC.
According to the finance ministry, “the ECC after consideration approved the formation of an assignment account under the title of Pakistan Energy Revolving Fund (PERF), to be opened with SBP Islamabad and maintained by CPPA.”
The Fund, according to the sources, is not a substitute for the revolving bank account established by the CPEC Energy Project Cooperation Agreement. They claimed that the International Monetary Fund’s restrictions placed restrictions on the government.
Pakistan had promised China it would form a special revolving account and maintain funds there totaling 22% of the amount charged by Chinese electricity producers.
According to a top official of the Ministry of Finance, the Pakistan Energy Revolving Fund may be established until a mutual resolution of the Revolving Account issue has been reached.
According to him, it has been decided to redirect Rs50 billion from the already approved budget of the subsidies to the new energy fund rather than guaranteeing a bank credit line or adding more money from the budget for the revolving account.
He stated that the withdrawal from the energy fund has a monthly cap of Rs 4 billion and that the arrangement is not a replacement for the revolving account agreement. A Rs. 50 billion supplemental grant, according to him, has been granted in order to divert funds from the subsidised grant.
According to a representative of the Energy Ministry, the agreement won’t really help Chinese energy companies, as they were already receiving some funding from the Power Division under the subsidy head.
According to the finance ministry, the ministry of energy presented a new summary for an amendment to the Power Purchase Agreement (PPA) for the commissioning of the selected project, the CPEC-Thar Coal Block-I Generation Company.
The ECC gave its approval for a change that would have allowed the project to be declared operational before reaching the financial close.
The ECC was notified that the project was 90% finished, but owing to unanticipated circumstances and reasons, which caused delays in Sinosure and lenders’ clearances, the company was unable to reach the Financial Close. Therefore, it was requested to take into account and approve the PPA’s effectiveness as of its execution date, or 27-08-2019, and to provide CPPA permission to change the PPA in accordance with that decision.
“The ECC approved the summary following discussion and emphasised that it must be ensured that this decision won’t have an impact on tariffs and that it is being approved due to an extraordinary circumstance.”
Pakistan’s inability to register a revolving bank account prevented the Chinese insurance business from lending money to the project’s parent company. However, the project’s sponsors committed $2 billion of their stock in order to complete the project by December of this year.
A summary of the revision of oil marketing companies’ (OMCs) margins on petroleum products was provided by the Ministry of Energy’s Power Division. Following a thorough debate, the ECC granted the agreed-upon reduced margin of Rs. 6 per litre and approved the summary in principle; however, its implementation will depend on the amount of fiscal room in POL prices.
By increasing the OMCs margin by 63%, or Rs2.32 a litre, the ECC has effectively raised consumer prices.
