ECC forms committee to address circular debt issue – Newspaper
ISLAMABAD: As it warned that the supply of crude oil, fuel oil, LNG and natural gas could soon cease due to the non-payment of more than 1.6 trillion rupees, the government on Wednesday set up a committee tasked with working out the modalities to avert the impending crisis and protect the oil companies from collapse.
The decision was taken during a meeting of the Cabinet’s Economic Coordination Committee (ECC) chaired by the Prime Minister’s Advisor for Finance, Dr. Abdul Hafeez Shaikh, who also held talks with the Chief Minister of Sindh to build consensus on increasing the wheat support price. .
In an SOS to the ECC, the oil division had warned that “inaction may lead to the collapse of some of its otherwise profitable entities, causing major supply chain disruption.” He said that Pakistan State Oil (PSO), Oil and Gas Development Company Ltd (OGDCL), Pakistan Petroleum Limited (PPL) and Pakistan LNG Ltd (PLL) were the four main entities which mainly financed circular debt of around Rs1 .601tr from all over the country. This includes Rs1.081tr principal amount and Rs520bn mark-up.
The ECC said the exploration and production companies – the OGDCL, Pakistan Petroleum Limited (PPL) and Government Holding Private Limited (GHPL) – were the latest entities in the circular debt supply chain to receive their arrears from the electricity, refinery and gas sectors. sector, had been negatively affected. They “are now at the stage where they may resort to shutting off crude oil, fuel oil, LNG and gas supplies for the foreseeable future. As a result, massive oil and gas shortages could be created in the whole country and the whole oil sector would be in danger of collapsing if circular debt settlement was not the top priority”.
The oil division has proposed to allocate Rs 3 or 5 per liter oil royalty to the OSP and add a fixed rate to the price of gas from Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) for the realization of their claims. government and other sectors and ensure the settlement of their debts.
It also demanded that OGDCL, PPL and GHPL be allowed to meet their sales tax and royalty payment obligations on a “collect and pay” model as temporary relief and to issue large chunks of Sukuk bonds against full circular debt. In addition, it proposed to deduct the Gas Development Surcharge (GDS) owed by PPL on gas sales to generation companies from the amount to be received by PPL from SNGPL while allowing SNGPL to set off its claim. on the federal government under the GDS against the amount owed by SNGPL.
In addition to this, the oil division has also sought debt adjustment with equity in profitable state-owned enterprises, energy projects and energy chain enterprises.
He said OGDCL was the most affected with claims of Rs401bn, followed by PPL with Rs378bn and PSO with Rs323bn. In fourth place is SSGCL with claims of Rs293bn, then GHPL with Rs113bn followed by Rs54bn and Rs39bn from SNGPL and PLL respectively.
The ECC has formed a committee comprised of representatives from all relevant stakeholders, including the Ministries of Finance, Energy, Petroleum and Planning, the Securities and Exchange Commission of Pakistan, the Regulatory Authority of Petroleum and Gas, OGDCL, PSO, SNGPL, PPL, GHPL and PLL, to prepare a proposal on the modalities for settling the circular debt of petroleum entities.
The committee was instructed to prepare a full proposal within a month and submit it to the ECC, an official statement said, adding that the ECC also decided that the issue of circular debt could be considered comprehensively and that a solution could be found to solve the problem.
The meeting approved additional technical grants for the National Accountability Bureau which had lost arbitration in London, for the Ministry of Health for the vaccination programme, for the Ministry of Religious Affairs due to Hajj expenses and for the Anti – narcotics.
The Ministry of National Food Security and Research briefed the ECC on the wheat import situation in the country. He said the Trading Corporation of Pakistan had opened the sixth tender for 110,000 tonnes of wheat at the lowest bid of $286.2 per tonne and after price matching, the total quantity picked up would be of 320,000 tons.
Interestingly, the ECC had recently authorized the import of wheat from Russia under a government-to-government agreement at the rate of $292 per ton.
The ministry told the committee that there would be sufficient availability of wheat in the country by January 2021 and with the increased supply, the price would eventually come down.
The ECC increased Gilgit-Baltistan’s quota by another 10,000 tons to 160,000 tons from 150,000 tons, as requested. The modalities for increasing the GB quota will be decided later.
The statement said Dr Shaikh, Minister of National Food Security Syed Fakhar Imam and Secretaries of Finance and Food held a virtual meeting with the Chief Minister of Sindh to discuss an optimal support price and consistent for the wheat harvest in the 2020-21 fiscal year. . Dr. Shaikh asked CM Syed Murad Ali Shah to agree on a well-coordinated support price to strike a balance between producers and consumers and ensure maximum productivity in the 2020-21 financial year. “Advisor Finance concluded that it was necessary to look at a bigger picture in determining a minimum support price for the wheat crop, keeping in mind its long-term financial implications,” the statement said.
Posted in Dawn, November 5, 2020