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News Clips 18 November, 2014

[ Zero power loadshedding for industries ensured ]
[ SBP reduces interest rate by 50bps ]
[ Government move to exempt textile industry from gas cut lauded ]
[ Punjab-based textile sector: Ministers divided over gas supply ]

Zero power loadshedding for industries ensured   [ top ]

The News, November 18, 2014
Punjab textile sector still not exempted from gas outages; ‘supply to CNG stations in Punjab to be suspended next year’

ISLAMABAD: In a positive development, the Ministry of Water and Power has implemented the directives of the prime minister to exempt the industrial sector from electricity loadshedding and to this effect, all the electricity Distribution Companies (DISCOs) have confirmed to the Ministry of Water and Power that the decision of zero loadshedding for all industries throughout the country was being implemented. 

The decision will help increase exports of the country, particularly the export products of the textile sector. The uninterrupted supply of electricity will also help the export-oriented industrial sector to leverage the GSP Plus facility, a senior official of the Ministry of Water and Power told The News while highlighting the background of the decision of zero loadshedding to the industrial sector.

Power generation stands at 10,500MW with more focus on thermal generation as hydro generation has plummeted to 3,600MW. However, the electricity deficit for the domestic sector stands at 2,000MW, which is manageable and the authorities have decided in line of the directives of the prime minister to provide uninterrupted electricity supply to the industrial sector, a spokesman of the Ministry of Water and Power told The News.

However, the decision to exempt the Punjab textile sector from gas loadshedding has not been made so far as the winter season has set in and the government is not in a position to annoy the domestic consumers by exposing them to more gas loadshedding at the cost of the industrial sector. “This will be a political suicide for the incumbent regime if it increases gas loadshedding for domestic consumers as in the recent past the government’s popularity nosedived just because of overbilling in electricity. So, in case it provides solace to the industrial sector with regard to gas supply, then the Nawaz government will face greater wrath from the masses,” the experts said.

The Ministry of Water and Power says it has been in constant touch with all the DISCOs for ensuring the implementation of the decision in its true spirit. The DISCOs were asked to submit a compliance report to the ministry.

The announcement of the ministry also says that the decision of zero loadshedding for the industry has no adverse impact on the demand and supply gap for domestic users as the additional generation is from the existing generation capacity available within the system. The additional generation will also not affect the cost of generation for domestic users.

An increase of about 900-1,000MW was witnessed in demand of electricity due to the provision of uninterrupted power supply to the industry in the country.

However, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi here on Monday in a meeting of the NA Committee on Petroleum and Natural Resources, while highlighting the availability of gas in the country, said that the government would close down from the next year the supply of indigenous gas to all CNG stations in the Punjab as the country was facing a shortfall of over 2 billion cubic feet of gas per day. If the CNG sector managed to import the LNG, then the government would allow the stations to be operational in the province.

The minister elaborated by saying that the government from the next year would stop gas supply to CNG stations in the Punjab and the CNG industry would be able to import the LNG and sell it to consumers as compressed natural gas (CNG). The minister said that the price of CNG that would be converted from the imported LNG would be 35 percent cheaper than petrol.

He said that the government was unable to provide gas to CNG and industrial sectors for four months in winter and if the CNG industry managed to import LNG by January 15, then all the CNG stations in the Punjab would be opened. The industrial sector is now being given uninterrupted electricity. He disclosed that power plants were being installed at 46 gas fields and they would generate about 1,000MW of electricity with 280 million cubic feet of gas, which was available in 46 gas fields.

During the meeting, Secretary Petroleum and Natural Resources Abid Saeed said that the prime minister had done away with the ban on new gas schemes. He said the Oil and Gas Regulatory Authority (Ogra) would raise the gas tariff of the new gas schemes. The gas schemes that were earlier facing deferment will now be initiated. He said that the government wanted to regulate the LPG prices for the domestic sector and would reduce its price for the masses and to this effect, the Ministry of Petroleum and Natural Resources had sent a summary to the CCI (Council of Common Interests) seeking a consensus decision. If the CCI approves the amendments in the LPG policy, then it will be possible to make available an LPG cylinder for domestic consumers at affordable rates.

To a question, he said that the government had decided to import 2 billion cubic feet per day LNG and this target would be achieved over the years in phases. The committee was informed that about 2,600 gas theft cases had been identified due to which the gas system had sustained a huge loss of Rs3 billion per annum. Out of Rs3 billion, Rs1 billion have been recovered.

The top officials of Pakistan Petroleum Limited (PPL) told the committee members that six discoveries had been made during the last few years and now they all were geared up to produce gas of 120 MMFCD by the end of the ongoing year. 

SBP reduces interest rate by 50bps   [ top ]

Dawn, November 16th, 2014
KARACHI: The State Bank of Pakistan (SBP) on Saturday reduced its policy rate by 50 basis points to 9.5 per cent effective Nov 17 for two months, after keeping it unchanged at 10 per cent for the last one year. 

The central bank in its Monetary Policy Statement cited some strong reasons for the cut including low inflation and falling commodity prices on the international market. 

The last change in the interest rate was introduced in November 2013 with an increase of 50bps to 10 per cent. 

“Given its recent downward trend, the likelihood for inflation to end the current fiscal year on a lower plateau is high,” said the SBP. 

However, the bank has enlisted a number of risks that may affect the monetary situation. First, downward trend over the medium- to long-term remains to be seen because it is based on volatile prices of “perishable items” and “oil”. 

Secondly, other risks identified in the previous statement such as cut in subsidy to electricity and levying of Gas Infrastructure Development Cess, still hold and if materialised can alter the inflation outlook on a higher side. 

Third, underlying inflationary pressures on core inflation remain. 

The SBP said the current low oil price could salvage some of the lost growth momentum. Broadly, however, growth in Large-Scale Manufacturing (LSM) would remain constrained due to energy bottlenecks. Thus the main thrust to the growth momentum would come from agriculture outcomes in the remaining months of this fiscal year. 

The SBP said the government had shown a significant progress in curtailing budgetary imbalances. “It seems on course to achieve further fiscal consolidation, given its current management of expenditures and borrowing pattern.” 

This has positive implications for the monetary management and more importantly, in the coming months, it would have a favourable impact on the private sector credit cycle. 

However, to achieve fiscal consolidation in the long run, structural reforms to broaden the tax base remain imperative, said the SBP. 

Low oil price along with falling inflation can improve competitiveness of Pakistani exports. Imports, on the other hand, might take advantage of low global commodity prices and increase further in the rest of FY15. 

The State Bank believes the trade deficit is expected to remain under pressure and the healthy growth in workers’ remittances would continue to assuage the weaknesses in current account deficit to some extent. 

The SBP said it is important to observe the role of foreign exchange inflows in domestic liquidity creation which helps the banks to extend more credit to the private sector. 

“This happens as government gets the space to borrow less from the banks, thereby leaving more liquidity for credit expansion,” said the SBP, adding that in response to various recent and ongoing efforts of the government, foreign exchange inflows would remain on track. 

Government move to exempt textile industry from gas cut lauded   [ top ]

Business Recorder, November 16, 2014
The Council of All Pakistan Textile Associations (Capta) has lauded the government's move to spare textile manufacturing units falling in the radius of SNGPL from gas cut, saying the unabated supplies will improve production scale and reduce delays in export shipments. 

The decision is expected to help improve gas supplies to the manufacturing units which will ultimately scale up production and increase shipment to world markets. The move will benefit the nation to grow its export supplies to the EU under GSP facility. "The factual position is that since last four months there have been a reduction of 4.2 percent in textile exports," Chairman, Capta Muhammad Zubair Motiwala said, adding that the government's decision will improve production and reduce delays in shipments. 

He said the move will also help boost trust about Pakistan across the world markets, which has been lowering in the wake of delays in consignments export. He termed the government's move as 'indeed' to underpin the national economy and textile manufacturing. "Pakistan's exports mainstay is on textile with 62 percent share in the country's overall exports," he said, adding that the textile sector provides 42 percent urban employment. 

He said the country's current account and trade account deficit depend on the performance of textile sector. "Undoubtedly, textile is the backbone of the economy of the country and needs a preferential treatment," he said. Motiwala appealed to the prime minister, the finance minister, minister of petroleum and natural resources and the minister of water and power, to adopt a 'sympathetic and pragmatic' policy towards textile sector for a long term. 

The textile sector should not be placed on the number four priority list of gas supply. "This sector comes below the domestic, commercial and fertiliser sectors," he said, adding that "it is indeed an irony and therefore he appealed that by segregating from all other sectors, even the industry, should be placed at No 1 in the priority list of gas supply". He asserted that the textile sector has the potential to redeem Pakistan from the spiralling debt, soaring unemployment besides helping the nation underpin its economy. 

"Today we stand at the lowest value-adding country in the world with 1.27 billion dollars from every one million bales of cotton-lower than India which stands with 1.79 billion dollars; 6.6 billion dollars by Bangladesh and more than 10 billion dollars by Korea and other countries," he pointed out. He linked the country's poor performance on value-added textile manufacturing to non-availability of infrastructure. "It is only our failure that we cannot deliver on time and cannot expand our capacity due to non-availability of infrastructure," Motiwala said. 

Punjab-based textile sector: Ministers divided over gas supply   [ top ]

Business Recorder, November 16, 2014
Prime Minister Nawaz Sharif''s key Ministers are reportedly scuffling with each other on the issue of gas supply to Punjab-based textile sector during winter months, well informed sources told Business Recorder. According to sources, Minister for Finance Senator Ishaq Dar, Minister for Textile Industry, Senator Abbas Khan Afridi and Commerce Minister, Engineer Khurram Dastgir are siding with the textile sector whereas Minister for Water and Power, Khawaja Asif and Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi are opposing supply of gas to Punjab-based textile sector in winter months. 

On Friday, Prime Minister Nawaz Sharif constituted a ministerial committee comprising Ministers for Water & Power, Khawaja Muhammad Asif, Petroleum & Natural Resources, Shahid Khaqan Abbasi and Textile Industry, Abbas Khan Afridi after Minister for Water and Power, Khawaja Asif registered a strong protest in the concerned quarters on resumption of gas supply to Punjab-based textile sector during winter. 

On Thursday, Finance Minister had suspended gas load management for Punjab-based textile industry after a detailed meeting with an All Pakistan Textile Mills Association (APTMA) delegation. The Commerce Minister also sided with APTMA, saying that with suspension of gas to textile sector, Pakistan will not be able to derive benefits from the GSP plus in real terms. 

"Exclusion of Commerce Minister from the committee means that Khawaja Asif has prevailed," said an official on condition of anonymity. Khawaja Asif, sources said, is of the view that since the government has ensured electricity supply to the industry in Punjab including textile sector, gas quota of textile sector will be utilised for power generation. 

On the other hand, Ministers for Finance, Commerce and Textile Industry argue that suspension of gas supply to Punjab based textile sector will double its production cost, which implies that textile industry in Punjab will be at a disadvantage as compared to textile industry established in other provinces and in addition exports of the country would be negatively impacted. 

Textile sector, sources in Textile Ministry stated, has proposed that the government should follow the same formula of gas supply it implemented last year. The Finance Minister, sources said, promised the textile sector twice to settle issue of gas but he apparently was not in a position to take any such decision single-handedly. Textile sector of China, Bangladesh and India are getting electricity at 8 cents per unit. In Sindh and KPK the price of electricity is also 8 cents because they generate electricity on gas. On the other hand, textile sector in Punjab is getting electricity at Rs 14.50 per unit and with a 30 percent electricity generated through gas the price is Rs 12.50 per unit. "Our industry is on a destructive path because of massive price difference within and outside country. We are facing a difference of Rs 82 billion. Exports have come down," lamented an office-bearer of All Pakistan Textile Mills Association.