The Economic Coordination Committee (ECC) of the Cabinet on Tuesday approved Rs 625 wheat procurement price announced by the Prime Minister last month and directed the provinces to immediately implement the new price to discourage hoarding that plunged the country into flour crisis.
The first ECC meeting, presided over by Prime Minister Yousaf Raza Gillani, expressed concern over high food prices, and directed the ministries concerned to come up with proposals for bringing them down.
The ECC also decided to review duty structure on import of power plants that may be abolished to encourage new independent power producers (IPPs) and up-gradation of existing ones to address the prevailing power crisis in the country.
The ECC expressed serious concern over hoarding by the private sector following increase of procurement price of wheat to Rs 625 from Rs 510 to make windfall profit even on food items. The meeting also directed the chief secretaries to ensure smooth availability and supply of flour in their respective provinces.
The meeting directed the State Bank of Pakistan (SBP) and Finance Ministry to sit together and evolve a mechanism to adjust huge Rs 359 billion borrowing of the previous government and also referred the issue to the Cabinet meeting to be held on Wednesday.
Meanwhile, a statement issued by the Prime Minister office said the ECC gave formal approval of the Guaranteed Minimum Price (GMP) of wheat from Rs 510 to Rs 625 per 40 kg as announced by the Prime Minister on March 29, 2008. It was also decided that the provinces should re-adjust with immediate effect the release price of wheat in accordance with the recently announced GMP.
The Prime Minister directed that all-out efforts should be made by the Provincial Governments/Passco to ensure maximum procurement of wheat at the announced GMP. Decision regarding import of wheat would be made in the light of post-harvest estimates.
The meeting also decided that programmes would be formulated to provide relief to the poor and vulnerable segments of society, and proposal in this regard would be submitted to the Cabinet. It was also decided that anti-smuggling measures would further be beefed up on both western and eastern borders. It was also decided to ensure that flour mills are released 100 percent wheat for grinding while ban on wheat export will remain in force. All wheat stockists in the private sector will be registered and monitored.
In view of the prevailing power deficit and need for immediate power generation, ECC decided that all IPPs nearing financial close April 30 be allowed to import cooling towers, heat recovery steam generators and feed water pumps after paying 5 percent customs duty as a onetime relaxation. In this regard, the ECC also approved amendment in the Income Tax Ordinance 2001 which read as follows:
"Provided further that exemption under this clause shall also be available to the expansion projects of existing Independent Power Projects already in operation."
It may be mentioned that private power projects under the 1994 Power Policy and the 2002 Power Policy are exempted from income tax subject to fulfilment of certain conditions. Kapco's existing power generation facility, being a privatised unit, was allowed income tax exemption only up to June, 28 2006. However, expansion of Kapco power plant has been approved by PPIB under the 2002 Power Policy, which allows income tax exemption for the term of the project.
Therefore, to provide income tax exemption to the Kapco expansion project in line with the 2002 Power Policy, an amendment is required in clause-132 of part-I of Second Schedule to the Income Tax Ordinance 2001. Further expansion of a few other existing IPPs has been approved by the Board of PPIB, including Hub Power, Japan Power, Kohineer Energy and Tapal Energy.
These expansions are again being implemented under the 2002 Power Policy. Hence the aforementioned amendment in the income tax ordinance 2001 is also needed for these expansion projects. It is important to highlight that no new exemption is being recommended. Kapco's existing plant/facility shall remain taxable under the income tax ordinance 2001 while income tax exemption is already available to IPPs under 2002 Power Policy.
The ECC also accorded approval for issuing of GoP guarantee for Rs 1 billion for short-term borrowing by PIAC to meet its immediate cash shortfall. The terms and conditions for the loans will be negotiated by PIAC with the lending banks and the same has to be approved by Ministry of Finance.
It was also decided that PIA will come back to ECC with restructured operational and financial plan to overcome its financial difficulties. The ECC commenced its proceedings with the recitation from the Holy Quran by Nisar Ali Khan.
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