The Economic Co-ordination Committee (ECC) of the Cabinet on Tuesday directed the Ministries of Petroleum and Finance to work out a petroleum products hedging plan, taking advantage of the declining oil prices in the international market. However, some critical questions remained unanswered: who would be empowered to take this step, and whether the Petroleum Ministry and oil marketing companies (OMCs) would support this idea?
Last year, when oil prices started rising, the Finance Ministry got Deutsche Bank to agree to hedge petroleum products. However, the Petroleum Ministry and the OMCs did not back this proposal. Hence, it was abandoned, analysts said. "No doubt, this is the right time to go for hedging, but the question as to who will agree to do this remains, as last year's efforts in this regard were blocked," said an official who was part of the discussion in the ECC meeting.
Sources said the ECC meeting, presided over by the Advisor to Prime Minister on Finance, Shaukat Tarin, also discussed wheat procurement plan 2009, prepared by the Ministry of Food and Agriculture (Minfa), but did not approve it in its present form, as it was felt that probably the private sector would not procure wheat at Rs 950 per 40 kg.
"Minfa has to rework on its wheat procurement plan in consultation with provinces and other stakeholders, and resubmit a comprehensive proposal in the next ECC meeting," said an official statement.
Official sources said that there was an impression in the ECC meeting that wheat procurement plan, at the approved price of Rs 950 per 40 kg, would backfire, as flour mills and private sector would not procure wheat at this price. Plenty of 'ifs and buts' were raised during the meeting, and a minister went as far as to state that a stick should be used to implement the decision.
According to official statement, while reviewing Minfa's summary on Wheat Procurement Policy-2009, the ECC noted that the present government's earlier announcement of GMP had resulted in increased acreage under wheat cultivation, and encouraged farmers to judiciously use inputs in wheat cultivation.
The ECC endorsed, in principle, the Cabinet's earlier approval for increasing wheat procurement targets from 5 million tons to 6.5 million tons, and directed the Ministries of Finance and Minfa to jointly work out the domestic distribution--and export strategy, where needed.
The ECC advised Minfa to interact with provinces and Passco to cross-check and finalise their wheat procurement ceilings, storage and distribution strategy by March 1, 2009. The ECC also approved Industry Ministry's proposal for allocation of 35 mmcfd additional natural gas from Mari gas field to Fatima Fertiliser Company, effective October, 2009, with certain modifications. Sources said the Ministry had submitted the summary with the backing of Prime Minister's Secretariat.
The meeting reviewed Key Economic Indicators (KEI) and overall price situation in the country and noted that overall Consumer Price Index-based inflation had registered a deceleration by 2.8 percent during January 2009 as compared to December 2008. The ECC further noted that forex reserves during January 2009 stood at $10.3 billion, including impact of IMFfirst tranche of disbursement and other positive inflows.
It noted that workers' remittances during July-December 2008 amounted to $3640.0 million, showing an increase of 18.7 percent. The ECC was informed that FBR had collected Rs 628.7 billion during six months of FY (July-December 2008), posting an increase of 22.7 percent, compared with the same period of last year.
Foreign direct investment (FDI) during (July-December, 2008) amounted to $2327.3 million, registering a healthy growth of 12.6 percent, compared with last year's. The ECC was informed that out of 2.5 million tons wheat earmarked for import, 1.76 million tons had arrived to supplement existing stock, which stood at 1.666 million tons on February 1, 2009.
It noted that existing sugar stock was reported to be around 1.173 million tons, which could be used to supplement open market needs. The ECC was informed that USC management had taken special measures to ensure quality and quantity of food items on USC's nationwide outlets.
It directed the Ministry of Industries and Production to ensure that essential food items at USC outlets are provided to buyers, so that market prices of said items are equalised. The ECC noted that 52 percent of planned quantity of urea has arrived, whereas 48 percent is due by the end of current month.
It considered another summary of Industries Ministry on provision of seed money for Pakistan Stone Development Company's (PASDEC) Marble Cities Project, and reconfirmed its earlier approval to arrange loan of Rs 400 million from the banking system, enabling PASDEC to develop infrastructure for proposed marble cities which has tremendous potential for growth and development and could boost national economy.
The ECC approved Ministry of Petroleum's proposal for gas supply to 50 mw power projects by diverting 12 mmcfd gas from SSGC system to PPIB, Ministry of Water and Power, for 5 years for power generation in accordance with Natural Gas Allocation & Management Policy - 2005.
The ECC was informed about rising trend in milk prices, without benefit to small farmers. The Ministry of Livestock and Dairy Development briefed the ECC about its 'Milk Collection Processing and Dairy Production and Development Program', which is in progress and is designed to support farmers in reaping dairy products development-based benefits.
The ECC constituted a committee comprising representatives of Minfa, Ministry of Livestock and Dairy Development and Planning Commission to formulate a strategy for provision of benefits of stable milk prices to small farmers.
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