Archive for ‘Business news’

July 2, 2011

Refining margins decline 20%

Revenue for refineries dropped 4 per cent in this quarter. PHOTO:FILE


Refining margins for local refineries declined by 20 per cent to $4.98 per barrel during June on a monthly basis.

All petroleum products prices except for High Sulphur Fuel Oil declined and led to lower monthly refining margins, according to an Elixir Securities research note.

Monthly refining margins would have been even lower by $0.28 per barrel had the government continued to price petrol using the old unitary penalty adjustment, adds the note.

Petrol’s ex-refinery prices are estimated at Rs60.24 per litre, which is Rs0.9 per litre higher than that derived by using old formula. However, refining margins for local refineries rose significantly by 23 per cent in June against the same period last year.

Deemed duty continued to play a vital role as excluding its benefits would slash margins by more than half. Deemed duty is a tax the government lets refineries charge in order to sell locally-produced diesel at the same price as imported diesel. This was imposed to protect refineries against volatility in international oil prices.

Company-wise margins

Amongst the listed refineries, National Refinery’s margins declined by 18 per cent to clock in at $5.87 per barrel whereas Attock Refinery’s margins was down by 26 per cent to $3.81 per barrel. Pakistan Refinery remained the major loser with 48 per cent decline in June, which averaged $0.74 per barrel.

However on a yearly basis, National Refinery led the increase by 24 per cent followed by Attock Refinery’s 16 per cent and Pakistan Refinery’s 23 per cent.

Naphtha plummets on high supply

Naphtha spread declined significantly to 30-month low of $7.56 per barrel primarily due to oversupply in the region during the period under review, says the note.

Petrol spread turned negative to $0.42 per barrel on possibility that Pakistan State Oil imported the product on cheaper prices, adds the note.

High speed diesel spread also declined by three per cent as most of the refineries recommenced production after the maintenance period, thus, increasing the supply of the product.

Moreover, furnace oil deficit witnessed some improvements as it improved by $1.33 to $14 per barrel, partially offsetting the impact of lower naphtha and petrol spreads.

Published in The Express Tribune, July 2nd, 2011.

July 2, 2011

Transit trade: Insurance firms refuse to provide guarantees

After receiving clearance earlier this month, the Afghan-Pakistan transit trade hit another snag as insurance firms withdrew their support. PHOTO: FILE


Insurance companies have refused to provide guarantees for Afghan trucks coming to lift cargo and goods imported under the new Afghanistan-Pakistan Transit Trade Agreement, causing a halt in trade, a commerce ministry official said.

“Since the new agreement came into force on June 13, no consignment has been cleared as insurance companies are reluctant to extend guarantees due to high risk involved in the trade,” he said.

Afghan transporters and traders have also termed the cost of insurance guarantees “unbearable” as this will increase their import cost.

To review and resolve the problem, the official said, a meeting of Transit Trade Coordination Authority, which was constituted to monitor and make the agreement effective, is expected to be called. Earlier, the two countries struck the new accord in a bid to check massive smuggling under the garb of transit trade, which caused losses of billions of rupees to Pakistan’s economy.

According to officials of the Federal Board of Revenue (FBR), Afghan transporters and importers have the responsibility to provide insurance guarantees. In the new agreement, it was agreed that bank guarantees would be provided for trucks coming from Afghanistan for lifting transit cargo and for value of duty on goods imported for the purpose. However, on the insistence of Afghanistan the bank guarantees were replaced with insurance guarantees, which would be returned on arrival of trucks and goods at Afghan destinations.

The new transit trade agreement has been put in place for a period of five years with extension of another five years on completion of the first term. However, the difficulties encountered at the very beginning are a cause for concern.

Published in The Express Tribune, July 2nd, 2011.

July 2, 2011

Action Needed: Government asked to take steps to restore gas, power

Due to hours of gas load shedding and power suspension, manufacturing activities of the hosiery industry had been affected drastically.


The Pakistan Hosiery Manufacturer and Exporters Association (PHMEA) North Zone demanded the government to take immediate steps for the provision of power and gas to save the industry from collapse and boost exports.

PHMEA Chairman Salamat Ali told reporters on Friday that due to hours of gas load shedding and power suspension, manufacturing activities of the hosiery industry had been affected drastically.

The experts of the hosiery industry were facing difficulties fulfilling their export commitments with foreign buyers, leading to declining markets, he added.

Published in The Express Tribune, July 2nd, 2011.

July 2, 2011

Ministry wants more: ECC allows 13 per cent increase in gas prices for fertiliser plants

 Some ministers oppose rise in fuel prices for fertiliser manufacturers, CNG outlets . DESIGN: CREATIVE COMMONS


The Economic Coordination Committee (ECC) of the cabinet has quietly given the go-ahead to the Ministry of Petroleum and Natural Resources to increase gas price by 13.15 per cent for fertiliser manufacturers with immediate effect.

The ministry had proposed an increase of 100 per cent in gas price for fertiliser plants effective from July 1, 2011. However, ECC accorded approval for an increase of 13.15 per cent which was worked out by the Oil and Gas Regulatory Authority (Ogra) and directed the petroleum ministry to seek approval either from the prime minister or cabinet for the 100 per cent increase.

The ministry had sought ECC’s approval for increasing gas tariff from 10 to 15 per cent for domestic consumers, 15 to 20 per cent for commercial and industrial consumers and 100 per cent for fertiliser manufacturers. It had also proposed taking prices of Compressed Natural Gas (CNG) to 65 per cent of petrol price. At present, CNG price stands at 50 per cent of petrol price.

Sources said during the meeting of ECC on Thursday, some ministers opposed the increase in gas prices for CNG outlets and fertiliser plants.

Fertiliser factories are paying Rs59.28 to Rs102.01 per million British thermal unit (mmbtu) for gas being used as feedstock in Sui Northern Gas Pipelines Limited’s (SNGPL) system. Commercial consumers are paying Rs563.76 per mmbtu, CNG Rs503.63 per mmbtu, industrial consumers Rs382.37 per mmbtu and power plants Rs332.36 to Rs980.61 per mmbtu.

“The petroleum ministry wants to end distortion in gas prices and ECC has in principle agreed to this by approving the increase in prices,” an official said, adding, however, the issue would be taken up with the prime minister and cabinet for a formal approval.

“If power plants and other consumers are paying higher prices for gas, then why fertiliser manufacturers should not pay the same price,” the official said, adding the idea behind the increase in gas price for fertiliser units by 100 per cent was to bring it on a par with prices paid by other consumers.

Sources stressed that old fertiliser plants had benefited much from cheaper gas supply and the subsidy could not continue for long as different sectors, particularly textile, were protesting against the concession.

Published in The Express Tribune, July 2nd, 2011.

July 2, 2011

PARCO increases LPG price

 LPG marketing companies are expected to import over 6,000 tons . DESIGN: FAIZAN DAWOOD


State-owned liquefied petroleum gas (LPG) producer Pak Arab Refinery Company (Parco) has increased LPG base-stock price by Rs4,000 to Rs72,000 per ton, starting July 3.

“LPG producer prices had been below Saudi contract price levels,” said a spokesperson from LPG Association of Pakistan (LPGAP). “Producers had the option to either keep prices unchanged or increase them to match the Saudi Aramco contract price for July.” Local LPG producer prices had been kept in line with Saudi Arabian export prices since January 2007.

The Saudi contract price, however, had decreased from $897 per ton for June to $839 per ton for July, and there was speculation that local LPG producers would slash prices by $58 per ton. But this is yet to happen.

“Oil and Gas Development Company Limited (OGDCL) revised its prices six times and Parco five times in the last one month to adjust to decreasing demand,” said the spokesman.

At an exchange rate of Rs86 per dollar, the ceiling for base-stock price of Pakistani LPG producers was Rs77,142 per ton during June, while for July the ceiling stood at Rs72,154.

Parco was selling its product at Rs68,000 per ton and will increase it to Rs72,000. OGDCL, which has been selling its product at Rs65,000 per ton, is also likely to match the new Parco price.

Revised LPG prices usually come into effect from the third of each month. It is critical that consumers, policymakers and market watchers operate on accurate information, rather than speculation, according to the spokesperson.

“The demand situation has improved marginally while local production has gone down,” he said, adding LPG marketing companies are expected to import over 6,000 tons ahead of Ramazan.

Published in The Express Tribune, July 2nd, 2011.

July 2, 2011

Market watch: Financial year starts on a low note

 Volumes fall to nine-month low.


The new financial year started off on a very low note as volumes fell to a nine-month low.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index fell 0.09 per cent or 11.86 points to end at 12,484.17 point level.

Thin trading activity was witnessed as merely Rs1.2 billion was the value of shares traded due to July 1 being banking holiday, said JS Global Capital analyst Jawad Khan. State Bank of Pakistan had earlier in the week announced July 1 as a bank holiday.

Furthermore, retail investors preferred to remain on the sidelines in the absence of any institutional support on the last trading sessions of the week.

Trade volumes plummeted to nine-month low of 35 million shares compared with Thursday’s tally of 66 million shares.

Foreign institutional investors’ (FII) activity was unheard today while locals were seen active in fertiliser stocks on the expected price hike in urea.

FII were net sellers of mere Rs4.4 million worth of shares compared with Rs2.7 billion sold on Thursday, according to data maintained by the National Clearing Company of Pakistan Limited.

Shares of 302 companies were traded on the last trading session of the week. At the end of the day 113 stocks closed higher, 95 declined while 94 remained unchanged.

Fatima Fertiliser and Engro were among the top volume leaders again despite the decision for 100% hike in gas prices being delayed, said Elixir Securities equity dealer Sara Shahid.

Jahangir Siddiqui and Company was the volume leader with 5.45 million shares gaining Rs0.39 to finish at Rs6.87. It was followed by Fatima Fertiliser Company with 3.73 million shares declining Rs0.06 to close at Rs16.58 and Lotte Pakistan PTA with 3.28 million shares falling Rs0.3 to close at Rs13.53.

Published in The Express Tribune, July 2nd, 2011.

July 1, 2011

Govt claims bullseye on tax collection target

Meeting the target may help restore the suspended IMF bailout programme.


After missing most targets in last year’s budget, the government took its critics by surprise on the eve of the financial year’s end – claiming that it had hit the bullseye on perhaps the single most important target: Tax collection.

In a hurriedly called press conference on Thursday, the tax authorities announced that they had surpassed the revised tax collection target for fiscal year 2010-11, after missing it for the last three years.

Meeting this target has also revived hope that the suspended $11.3 billion International Monetary Fund bailout package may be restored.

“Against a revised target of Rs1,588 billion, the Federal Board of Revenue (FBR) has so far collected Rs1,590.5 billion in taxes and more receipts are coming in,” announced FBR Chairman Salman Siddique at the conference. The 2007-08 was the last fiscal year when the government achieved its tax collection target.

The recent collection brings Pakistan’s tax-to-GDP ratio to 9.2 per cent, the second-lowest in the region after Bangladesh.

The chairman said the ratio can only be increased if the government brings all sectors into the tax net.

Bona fide collections

Amid apprehensions of jugglery in figures and concerns of alleged arm-twisting, the FBR says it has achieved its revenue target in good faith.

The tax authorities collected Rs1,406.4 billion on account of income tax, sales tax and federal excise duties and Rs184 billion on account of customs duties.

The customs duties’ target was surpassed by Rs12 billion, said member customs Mumtaz Haider Rizvi.

The Rs1,590.5 billion figure, however, is Rs77 billion below the original tax collection target of Rs1,667 billion that was approved by parliament last June.

“It is bona fide collection and we would conduct an audit along with private auditors”, said the chairman in response to questions of soliciting advances from banks to meet the target.

Even the IMF would put this figure in its own auditing process, he said.

The chairman, however, admitted that the government took an advance of Rs5 billion last year from the Trading Corporation of Pakistan.

Sohail Ahmad, the then-chairman FBR, has recently been appointed Secretary Establishment Division.

Restoring the IMF programme

The provisional revenue collection figures provides a sigh of relief to economic managers who have been struggling to keep the budget deficit below six per cent of the total size of the economy.

“The collection would help restore the IMF programme as the government would now be able to restrict the budget deficit at 5.2 per cent (excluding 0.6 per cent of circular debt payments) along with curtailing expenditures”, he added.

Siddique said the collection would allow the policy makers to tell the world that Pakistan could achieve its targets.

The target was only achieved after Prime Minister Yousaf Raza Gilani provided an environment of “no political meddling in tax affairs,” he added.

Amnesty scheme

The amnesty scheme also played a part in meeting the target, said Siddique.

The government had waived off all penalties and surcharges on late payment of taxes. The chairman announced to discontinue the amnesty scheme with immediate effect.

Broadening the base

The chairman said that efforts to broaden the tax base would continue and in the next fiscal year, the government plans on  collecting Rs106 billion simply through broadening of the tax base.

This would help achieve the next year’s collection target of Rs1,952 billion, he added.

Regarding tax evaders, Siddique said that out of 71,000 prospective evaders, as many as 18,000 have filed their income tax returns.

Some of them have declared their source of income to be ‘income from abroad’ and that claim will now be probed, he added.

Published in The Express Tribune, July 1st, 2011.

July 1, 2011

Karkey Rental Power Plant: Govt purchases electricity at shocking price of Rs41 per unit

 NEPRA approves 61 paisa increase in power tariff for May. DESIGN: ESSA MALIK


In an astounding development, the Central Power Purchasing Agency (CPPA) has disclosed that the government was purchasing electricity from Karkey Rental Power Plant at record price of Rs 41 per unit, more than twice the amount paid to any other Independent Power Producer.

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July 1, 2011

parliamentary panel has decided to investigate and fix responsibility on the Oil and Gas Regulatory Authority

 Ogra granted 306 licences in 2009-10 and 170 in 2010-11 despite a ban on new connections. PHOTO: FILE


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July 1, 2011

20 per cent increase in gas prices planned Gas Price Hike: Move to have negative effect on industry


A 20 per cent increase in gas prices planned by the government is likely to have negative repercussions on the economy, and remove export-oriented industries from the international export market, according to Lahore Chamber of Commerce and Industries President Shahzad Ali Malik.

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