By Staff Reporter
ISLAMABAD: The government on Thursday raised the Dealer Transfer Price (DTP) of imported urea, the fertilizer most used by farmers, by near 25 percent to Rs2,150/bag to bring it par with the cost of locally produced fertilizer.
DTP for imported urea was fixed at Rs1,718 per 50kg bag, exclusive of Rs50 dealer margin, in last February, but the retail urea price increased to Rs1,950 per bag.
As the price of imported urea stored in National Fertiliser Marketing Ltd (NFML) warehouses is lower than locally manufactured urea, the Economic Coordination Committee (ECC) of the Cabinet removed the difference in prices by increasing DTP for imported fertiliser to Rs1,805 per bag.
Federal Minister for Finance and Revenue Miftah Ismail presided over the ECC meeting at the Finance Division.
The ECC also decided that the DTP of remaining stocks held by NFML further increased to Rs2,150 per bag with effect from July 26 onwards.
The ECC also directed that the urea pricing and dealer margin should be fixed in future with prior approval of the committee, instead of seeking ex-post facto approvals as fait accompli.
The DTP revision would result in an increased recovery of Rs117 million to NFML on the remaining stocks.
The meeting was informed that local manufacturers had increased retail prices of urea to Rs2,150 from Rs1,805 on June 28. Over time, NFML had booked imported urea at Rs1,805 per bag and shipped 83,295 tonnes, leaving a balance of about 16,904 tonnes with NFML stocks till June 25.
Meanwhile, the ECC also approved on a government guarantee of $142 million in the favour of National Bank of Pakistan (NBP) to bailout the Roosevelt Hotel Corporation (RHC).
“The ECC after discussion approved the GoP (government of Pakistan) guarantee for the financing facility … as a loan in accordance with facility agreement between the RHC and the NBP (National Bank of Pakistan),” a statement said.
The ECC back in 2020 had approved this financial assistance, but owing to certain circumstances, a government guarantee could not materialize for the same.
Pursuant to the decision, the Finance Division had arranged the financing facility as loan from the NBP.
Earlier on October 5, 2020, the Finance Division had approved the term sheet and issued Letter of Comfort (LoC) for which validity was extended from time to time. As per agreed terms of the facility agreement, GoP guarantee was required to be issued in favour of NBP.
However, the GoP guarantee was put on hold on the advice of the Office of Attorney General of Pakistan as a result of litigation by Tethyan Copper Company Ltd in a Reko Diq case in British Virgin Islands (BVI) court.
Currently, the government of Pakistan and Balochistan and TCC have now entered into a Standstill Agreement whereby all litigation has been suspended inclusive of enforcement of the proceedings in the BVI, where PIA-IL is registered, against asserts owned by PIA-IL till December 15, 2022. Now the Finance Division had asked the aviation ministry to seek specific approval of the ECC for the issuance of the GoP guarantee in line with the facility agreement between the RHC and the NBP.
The RHC, owned by Pakistan International Airlines-Investment Limited (PIA-IL), had suffered huge losses during the Covid-19 pandemic and was subsequently shut down in December 2020 to avoid further financial deterioration.
Moreover, the Ministry of Energy (Petroleum division) presented a summary on syndicated running of finance facilities for PSO (Pakistan State Oil).
PSO’s liquidity issues were discussed in the ECC meeting on July 31, 2022. In that meeting it was also discussed to arrange a government guarantee loan to ease out liquidity issues of PSO.
A consortium of banks including ABL, NBP, MCB, UBL, and HBL was formed for sanctioning a loan amounting to Rs50 billion to PSO through a GoP guarantee.
As the issuance of guarantee will take time, the banks have shown their willingness to initiate the process of issuing loans on Letter of Comfort.
In view of the above, the ECC approved the proposal to issue a letter of comfort in favour of PSO for raising a loan facility of Rs50 billion on urgent basis. However, the Finance Division will divert some other allocated guarantees to PSO without exceeding Rs105 billion domestic guarantee limit for the first quarter of this calendar year.
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