WEDNESDAY OCTOBER 24: Rs 9.36 billion PIA loan guarantee approved by ECC: bike kits tariff reduced

ISLAMABAD: The Economic Co-ordination Committee (ECC) of the Cabinet has approved issuance of guarantee for fresh loan of Rs 9.36 billion for Pakistan International Airlines (PIA) and reduced 10 to 17.5 percent tariff for different categories of components/kits used by motorcycle industry.
The meeting of ECC presided over by Finance Minister Dr Abdul Hafeez Sheikh on Tuesday decided that review would be done after one year. The rate of duty has been reduced for Completely Built Unit (CBU) and components from existing 20 percent to 10 percent and CBU and components for assembly/manufacture of vehicle in any form of kit from 65 percent to 50 percent.
The ECC on a summary moved by the Ministry of Commerce approved consensus proposal to reduce tariff on Completely-Knocked-Down (CKD) kit, which is not manufactured locally, from existing 15 percent to 5 percent and on CKD kit which are manufactured locally, from existing 47.5 percent to 30 percent.
The ECC also approved issuance of guarantee for fresh loan of Rs 9.36 billion for PIA as well as extension of government guarantee for two years on Sukuk Certificates of Rs 6.8 billion. The meeting also directed PIA to resubmit the business plan in the next meeting of the ECC.
An official said the Ministry of Defence moved a summary to the ECC requesting that PIA is facing liquidity crunch for the last several years because of high oil prices, depreciation of Pakistan rupee against the dollar and aging fleet and is unable to pay the debt. The ministry further stated that the PIA has to raise fresh loan to repay the debt for which the ECC was requested to allow fresh borrowing to the PIA. The government guarantee for PIA Rs 6.8 billion Sukuk certificates has expired and repayment of loan in six equal instalments was due from February 2012. The flag carrier was unable to repay the debt due to financial crunch and wanted extension in government guarantee for two years.
The ECC also approved equity of Rs 7.952 billion for upgradation of capacity of Wah Brass Mills (Pvt) Project from current 7000MT to 24000MT with equity ratio of 80:20. The Wah Industries would inject 20 percent equity into the project of Rs 1.59 billion or $16.7 million whereas for the remaining amount a letter of comfort or sovereign guarantee would be issued by the government.
The loan of $16 million has been approved at the rate of annual average cost of borrowing of the government for fiscal year 2012-13 repayable over the period of 7 years and issuance of letter of comfort/sovereign guarantee against loan facility to POF Wah amounting to Pak rupees equivalent to $59.4 million to be raised from any of scheduled commercial bank.
The ECC also discussed summary on "Policy Guidelines for Energy Efficiency Audit of Captive Power Plants and Natural Gas Boilers, proposing reduction in efficiency benchmark for gas engines/gas turbines, combined cycle and boilers. As the comments from Ministry of Water and Power and Ministry of Textile Industry were not presented in the summary, it was decided to reconsider the summary in next ECC meeting after receiving the formal comments from both the Ministries.
On the summary of "LPG Production and Distribution Policy 2012" Minister for Law and Justice remarked that comments by his ministry are not present in the summary. After discussing different dimensions especially arguments given by Minister for Law and Justice, ECC decided to reconsider the summary in the next meeting after having formal comments by the Law and Justice Division.
The ECC also discussed summary on import policy of used cars submitted by Ministry of Industries. Secretary Industries argued that huge import of used cars is severely damaging the domestic car industry and proposed to reduce the age of used cars from five to three years. After due deliberations, ECC constituted a committee comprising representatives from Ministry of Industries, Commerce, FBR and Production to work out further and give a detailed presentation in the next ECC meeting.
The ECC discussed in detail the allocation of gas to fertiliser plants from dedicated sources and was informed that 202 mmcfd gas would be made available to fertiliser sector from newly discovered fields and from the fields having additional gas.
The ECC was also informed that 1000 km long pipeline would be required to be established to utilise this additional gas from the fields. After considering the different aspects of the proposal, ECC gave in principle approval for establishment of 1000km long pipeline. ECC also set up a committee comprising Ministers for Information and Broadcasting, Petroleum and Natural Resources, Law and Justice, Deputy Chairman Planning Commission and Secretary Water and Power to work on determination of legal modalities, mechanism for pricing, review of agreement and estimation of cost and time. The said committee will present its report in the next ECC meeting.