The Finance Ministry is reported to have allocated foreign exchange to Trading Corporation of Pakistan (TCP) to open letters of credit for sugar and urea import, sources close toTCP Chairman Anjum Bashir told Business Recorder from Karachi.
The TCP had requested the federal government to provide $150 million for opening letters of credit (L/Cs)for both sugar and urea, to be imported on the instructions of the Economic Co-ordination Committee (ECC) of the Cabinet. Bashir met Commerce Secretary Zafar Mahmood on March 30, 2010 and discussed issues regarding urgent requirement of foreign exchange allocation, release of subsidy, and recovery of receivables from Utility Stores Corporation (USC) and others to undertake import of sugar and other essential commodities, sources said.
As regards rupee cover for these letters of credit, the TCP Chairman called on the President of National Bank of Pakistan, Ali Reza, and requested for Rs 15 billion, through increase in its overdraft limit, with the assurance that this amount would be repaid on priority and, after retiring this amount, other receivables, or subsidy, would be adjusted as per term sheet signed with consortium of banks for their overdraft amounts extended to TCP, sources added.
NBP President, sources said, gave assurance of extending full support to the organisation but, according to TCP Chairman, the bank is under limitation from the State Bank of Pakistan (SBP) to bring this requirement to the consortium of banks. According to sources, SBP Governor Salim Reza convened meetings on March 31, 2010 and April 1, 2010 with consortium of banks, which were of the view that they could offer only up to the agreed limits of overdraft.
This implies that, practically, the banks have refused to given additional funds to TCP, and now the organisation would have to rely on receipt of subsidy and receivables. However, on insistence, NBP President agreed to provide Rs .4.5 billion to Rs 5.0 billion over and above the existing limit of overdraft, provided TCP repays early, without disturbing repayment schedule already agreed with the consortium of banks, sources said.
TCP is assigned to import 1.2 million tons of white sugar and 100,000 tons of urea. The ECC, in its meeting on March 30, 2010 had reiterated its earlier decision that TCP would import balance quantity of 700,000 tons of white sugar, for which the tenders would be floated during the current month and finalised in May, 2010. However, TCP apprised the ECC of its liquidity position and requested for urgent allocation of $150 million for opening of LCs and equivalent rupee cover.
It was also pointed out that Rs 15 billion is urgently required from the total outstanding of Rs 33 billion under the head of subsidy and Rs 29 billion receivables from the USC, the National Fertiliser Marketing Limited (NFML) and the provincial governments to honour its commitment of providing essential commodities, like sugar and urea.
All tenders finalised and awarded require the supplier to provide performance guarantee within 5 days of award and then TCP is obliged to open LC within 5 days of receipt of performance guarantee. Sources said that TCP Chairman has requested the Finance Ministry to urgently release budgeted subsidy for commodity operation.
The Federal Board of Revenue (FBR), sources said, is also processing a proposal to exempt TCP from duties and taxes on import of sugar. It is pertinent to mention here that the ECC has exempted the TCP from sales tax and FED on import of sugar. However, FBR has not yet issued any SRO in compliance of the ECC decision.