The Economic Co-ordination Committee (ECC) of the Cabinet has allowed institutional investment in National Saving Schemes with a view to meeting government''s growing requirements of borrowing. An official, who requested anonymity, said the decision of the economic team to allow institutions to make investment in the saving schemes would not augur well for the financial sector and: it would create distortions.
Source said the economic managers have provided another window of borrowing to the government by taking a decision and a huge amount is expected to be invested by institutions. They said the decision also entails a grave risk of distortion in the financial sector of the country and to fixed investment. The government would be requiring huge borrowing in the next couple of months to finance the yawning fiscal deficit as well as for election related decisions.
The ECC presided over by Finance Minister Dr Abdul Hafeez Sheikh exempted gas pipeline and LNG projects from all taxes and duties in view of high upfront cost and risk profile of the country on a summary moved by the Ministry of Petroleum and Natural Resources. The petroleum ministry requested the government to allow exemptions in taxes and duties to attractive cost reduction incentive from the government to encourage foreign investors to participate in pipeline and LNG projects because of high upfront cost projects as well as risk profile of the country.
The ECC approved exemptions of sale tax/federal excise duty (ST/FED) on imported natural gas, exemption of sale tax for EPC contractors involved in the gas import projects and exemption from custom duties on HR coils, liner pipe and pylons piles. The ECC also approved temporary importation of plant, equipment, machinery, LNG terminals and peripheral infrastructure, etc, be allowed for the projects duty-free on import-cum-export basis, and addition of natural gas infrastructure importers and its developers in tax and duties exemption SRO.
The ECC has also approved the summary for the extension of date of completion of BYCO Oil Pakistan Limited to avail 7.6 years tax holiday. The BYCO Petroleum Pakistan was granted tax holiday for 7.6 years and the period was completed in 2011 but the refinery could not be commissioned within the stipulated time. The Ministry of Petroleum and National Recourses requested the ECC that the company may be granted extension of the facility up to the end of 2012, which was approved after much deliberations.
The meeting also approved that collection of applicable taxes, duties and any other levies may be deferred till the commencement of commercial operations of the natural gas and LNG import projects, on the analogy of such facility provided to power projects by ECC in July 2009. The ECC also approved low BTU Gas Pricing Policy and Fortnightly Price Adjustment of petroleum products as well as decided to give credit guarantee of Rs 210 billion to provinces for procurement of 7.725 million tons wheat for 2011-12.
An official said provincial governments were not ready to bear the additional cost of Rs 1.93 incurred due to increase in support price by the federal government from Rs 950 to Rs 1050 without consulting them. The ECC also approved establishment of subsidiaries in Tanzania, a request by UBL Pakistan and Institutional Investment in National Savings Scheme (NSS).
The meeting was attended among others by Minister for Petroleum and Natural Recourse, Dr Asim Hussain, Minister for Water & Power Syed Naveed Qamar, Minister for Production, Anwar Cheema, and Minister for Privatisation, Ghaus Buksh and Minister for Railways, Ghulam Ahmad Bilour, Deputy Chairman Planning Commission, Secretaries for Railways, Finance, Economic Affairs Division, Petroleum and Natural Recourse and other concerned high officials.
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