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PAK LAW PUBLICATION News Alerts 11 November 2013EMAIL # 256-2013

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Daily News

Monday, November 11, 2013

PAK LAW

PUBLICATION

2013

Office # 05, Ground Floor, Arshad Mansion, Near Chowk A.GOffice, Nabha Road Lahore.

Ph. 042-37350473Cell # 0300-8848226



News ContentsTop Stories.............................................................................................................................................4

Sales tax registered persons: action against non-filers of IT returns begins ..........................................4

Price volatility in world market: thin participation witnessed in first urea tender ................................5

Hakimullah a martyr?: Army seeks apology from JI chief.......................................................................6

PTI to stop Nato supplies after November 20: Imran.............................................................................7

Pakistan wants peace to prevail with India: Sartaj .................................................................................7

Indian Prime Minister to miss Commonwealth summit .........................................................................8

Rangers can keep suspect in custody for 90 days.................................................................................10

Taxation: Pakistan ..............................................................................................................................11

Officials asked to resolve transporters' complaints..............................................................................11

BOPET film projects: Rs 8 billion investment at stake ..........................................................................11

Business community: tax relief measures announced .........................................................................12

Customs seizes smuggled goods...........................................................................................................13

Lying in customs warehouses: FBR compiling arms & ammunition data .............................................14

Corrupt tax officials: FBR launches crackdown.....................................................................................15

Business & Economy...........................................................................................................................17

Goods transporters strike enters 4th consecutive day.........................................................................17

LCCI demands tax amnesty scheme......................................................................................................17

Shahbaz greets LCCI for establishing Mediation Centre.......................................................................19

IT services export fetch US$ 1.250bn in last five years.........................................................................20

Cotton and Textiles: Pakistan ............................................................................................................22

Transporters' strike: exporters fear losses worth billions ....................................................................22

Punjab government earmarks land for garments city ..........................................................................22

Polyester value chain: 'NTC probe into duty structure inappropriate'.................................................23

Reaping GSP Plus benefits: energy, law & order vital prerequisites: PRGMEA....................................25

GSP plus status, rains help cotton prices to recover slightly ................................................................26

PCGA threatens to shut all ginning factories ........................................................................................27

Agriculture and Allied: Pakistan .......................................................................................................28

Price volatility in world market: thin participation witnessed in first urea tender ..............................28

Tomato prices rise by 100 percent last week .......................................................................................29

KP collects Rs 312 million tobacco development cess..........................................................................29

GAPC-Pakistan renamed .......................................................................................................................30

Russia seeks to invest in PSM: Jatoi......................................................................................................30

Pakistan has best buffalo breed: UVAS vice chancellor........................................................................31



Essential commodities: ACs directed to take action against hoarders.................................................31

Fuel and Energy: Pakistan .................................................................................................................33

LPG price touches Rs 160 per kg mark..................................................................................................33

RSPN constructing biogas plant ............................................................................................................34

Iran's hint at revising gas price widely hailed .......................................................................................35

Chief minister Punjab reviews progress on energy projects ................................................................36

Sindh CNG stations to remain closed today .........................................................................................36

Why has government increased power sector subsidy ........................................................................37

Gas, power shortages: big relief through LNG import by next year, says Abid....................................38

BR Research: All .................................................................................................................................40

With Millat, lies a lesson for auto industry...........................................................................................40

Tomatoes on fire...................................................................................................................................41

Talk more, get insured!.........................................................................................................................42

Global oil-–bears outclass bulls ............................................................................................................43

Brief Recordings..................................................................................................................................45

'Pakistan may be the largest mobile application developer in the world,' Chairman, [email protected]

Miscellaneous News .............................................................................................................................47

Waiting for rescue: Pakistan Steel Mills needs huge money injection to stay afloat...........................47

A look back at history of PSM ...............................................................................................................48

Pakistan Steel privatisation looks even more difficult than last attempt.............................................50

Billets vs ship plates - tax benefits or a level playing field? ..................................................................52

Re-rolling mills increase production of steel products .........................................................................54

Energy crisis: LNG import can lead to cut in power tariff .....................................................................55

Hitting back: PTA blocks 0.2m IP addresses in fresh drive against grey traffic ....................................56

OPEN MARKET FOREX RATES................................................................................................................58

INTER BANK RATES................................................................................................................................59

Bullion Rates (Gold Prices) in Pakistan Rupee (PKR).............................................................................60



Top Stories

Sales tax registered persons: action againstnon-filers of IT returns beginsNovember 11, 2013

The Federal Board of Revenue (FBR) has initiated legal action against 30,191 sales taxregistered persons, who filed their sales tax returns but failed to submit annual income taxreturns in 2012-13. Sources said on Sunday that it is quite amazing that many 'ActiveTaxpayers' filing sales tax returns but not filing their annul income tax returns.

On the basis of computerised risk-based evaluation of sales tax (CREST) forensic analysis,the high-ups of the FBR got alert and now focus on such taxpayers who are not reporting orunder-reporting their taxes.

RTO-wise data of such cases revealed that the RTO Lahore has 4415 cases; RTO Karachi2111; RTO Karachi-II 3450; RTO Karachi-III 2553; RTO Lahore-II 3031; RTO Faisalabad2489; RTO Rawalpindi 2462; RTO Islamabad 1994; RTO Peshawar 1658; RTO Multan1372; RTO Gujranwala 1096; RTO Sialkot 950; RTO Quetta 728; RTO Hyderabad 527;RTO Bahawalpur 508; RTO Sargodha 291; RTO Abbottabad 278;RTO Sukkur 183; LTUKarachi 46; LTU Islamabad 30 and LTU Lahore has 19 cases.

The FBR has also started imposing heavy penalties on non-filers of withholding statementunder section 165 of the Income Tax Ordinance, 2001.

One of the FBR 's electronic intimation issued to such non-filers said that it is taxpayer legalobligation to withhold/deduct tax under various sections of the Income Tax Ordinance, 2001and to deposit the same into the treasury within the stipulated time period as per Rule 43 ofIncome Tax Rules, 2002. The unit is liable to file monthly statements by 15th of each monthu/s 165 of the Income Tax Ordinance, 2001 through e-filing on the Portal of FBR, as per Rule73 (2A) of the Income Tax Rules 2002 read with SRO 708(I)/2007.

However, as per e-portal of FBR, the unit has failed to file the above said statement as persales tax record available on the e-portal. The non-filing of the said periodic statement callsfor imposition of penalty as per Serial No (1A) of table mentioned in section 182(1A) of theIncome Tax Ordinance, 2001, as amended vide the Finance Act, 2013. It said that "Whereany person fails to furnish a statement as required under section 115 or fail to furnishstatement as required u/s 115,165 of 165(A) within due date such person shall pay a penaltyof Rs 2500/- for each day of default subject to a minimum penalty of 50,000 rupees".

Through e-mail, the unit is requested to comply with the provisions of law by e-filingstatement u/s 165(5). In case of non-compliance/non-submission of statement along with theproof of payment CPR No tax withheld. The tax office will be constrained to issue a formalshow cause notice, electronic intimation added.

Copyright Business Recorder, 2013



Price volatility in world market: thinparticipation witnessed in first urea tenderNovember 11, 2013

RIZWAN BHATTI

A thin participation was witnessed in the first urea tender conducted by the TradingCorporation of Pakistan (TCP) for the import of 0.1 million tons, mainly due to pricevolatility in the world market. Overall some four international suppliers participated in thetender, out of which three submitted their offers for the supply of urea, while one biddersubmitted a regret letter.

Presently, Pakistan, India and Bangladesh are facing acute shortage of urea and have plannedto import millions of tons of the commodity from the world market to meet their domesticrequirements. Pakistan has already floated a tender for the import of 0.5 million tons, whileIndia also intends to import about 2 million tons of urea.

Sources said that ahead of this demand, urea prices in the world market were on the surge,and had gone up by $60-70 per ton during last three months. Urea prices have reached $350-360 per ton (Cost and Freight) in the first week of November, previously they stood at $290-300 in August.

The price volatility in the world market has caused thin participation of bidders in TCP's ureaimport tender. Although, after the announcement, some 18 pre-qualified parties purchasedtender documents from the state-run grain trader for participation in urea tender, however,most of international suppliers avoided submitting bids in the first tender.

Sources said, "Presently urea prices in the world market are continually fluctuating and trendis on higher side, therefore the foreign suppliers were reluctant to participate in the tender."

"The international suppliers are closely monitoring the world market and accordingly willtake their positions as the TCP has to open four more tenders for the import of 0.4 milliontons of urea during this month," they added.

Last month, the Economic Co-ordination Committee (ECC) of the cabinet allowed import of0.5 million tons of urea to prevent shortage during Rabi season. The TCP was directed toimport the same quantity till December.

In the line with these directives, the TCP floated five international tenders, out of which thefirst tender was opened on November 8, 2013 at TCP head office.

In order to avoid speculation, the TCP invited bids from pre-qualified foreignsuppliers/exporters, already registered with the corporation, for the supply of urea in bulkthrough world-wide sources on Cost and Freight (C&F) basis. In response of the TCP'stender, some four parties participated in the tender, however one supplier namely M/s SwissSingapore submitted regret letter, while the remaining three quoted prices ranging $344.73per ton to $348.95 per ton (C&F).

Lowest bid was submitted by the M/s CHS Europe Switzerland, which offered to supply



100,000 tons of urea at $344.73 per tons (C&F). In addition, M/s Dreymoor Fertilizersubmitted a price of $348 per ton for supply of 100,000 and M/s Key Trade AG quoted aprice of $348.95 for same quantity.

Sources said that the quoted prices, in the first tender, were some $40-45 per ton higher thanprevious tender (conducted in August 2013), in which the TCP finalised deal for the importof 150,000 tons. The delay decision of urea import will cost millions of dollars additionalburden on the national exchequer as the commodity prices in the world market are on higherside, they added. As the lowest bid was conforming to technical specifications and terms andconditions of the tender the offer was accepted by the TCP and the contract for the supply of100,000 tons was awarded to the lowest bidder accordingly.

Four more tenders are lined up for the import of 0.4 million tons of urea. Next tender will beopened on November 11, 2013 (today) for import of 100,000 tons of urea, while the resttenders will be opened on 18th, 20th and 22nd of this month.


Hakimullah a martyr?: Army seeks apologyfrom JI chiefNovember 11, 2013

The controversial remarks of Ameer Jamaat-i-Islami (JI), Syed Munawar Hassan, declaringthe dead terrorists as martyrs were condemned by the Pakistan Army. The army has sought anapology from Jamaat's Ameer. Following a TV interview of Munawar Hassan, a spokesmanfor Inter-Services Public Relations (ISPR) termed his statement highly irresponsible andmisleading, saying declaring the dead terrorists as shaheeds is an insult to the martyrs-thousands of innocent Pakistanis and soldiers of Pakistan's armed forces.

It further said that Hassan had tried to invent a logic based on his political convenience.Strong condemnation of his views from an overwhelming majority leaves no doubt inanyone's mind that all of us are very clear on what the state of Pakistan is and who are itsenemies, it added.

The sacrifices of our martyrs and their families need no endorsement from Hassan, the ISPRstatement said, adding such misguided and self-serving statements deserve no comments.

However, coming from Ameer of the Jamat-e-Islami, it added, a party founded by MaulanaMaududi, who is respected and revered for his services to Islam, is both painful andunfortunate.

"The people of Pakistan, whose loved ones laid down their lives while fighting the terrorist,and families of shuhada of armed forces demand an unconditional apology from MunawarHassan for hurting their feelings. It is also expected that JI should clearly state its partyposition on the subject," it maintained.




PTI to stop Nato supplies after November20: ImranNovember 11, 2013

Pakistan Tehreek-e-Insaf Chairman Imran Khan on Sunday asked the Federal government toget assurance from the US that it would not carry out more drone strikes in the tribal area ofPakistan. "We will stop Nato supplies through Khyber Pakhtunkhwa after November 20, andwould launch a protest drive against the US drone strikes," PTI chief said while addressing afunction held at Ummah Welfare Academy in Nowshera.

"No political party has made efforts for establishment of peace in the Federally AdministeredTribal Areas (Fata) by holding negotiations. But, we are supporting talks with the Talibansince long," he said. "Those people who are taking money from foreign powers, are dubbingus as supporter of Taliban," he maintained.

He alleged that the US-backed lobby in Pakistan was not interested in establishment oflasting peace in the country. He added that a large number of innocent civilians, includingwomen, children and elderly, had been killed by the US.

He said that Khyber Pakhtunkhwa and Fata had been worst-affected areas due to the ongoingwar against terrorism.

Regarding the objection of some quarters that PTI on one hand closing Nato supplies but nothe other getting foreign aid, he said that the protest did mean waging war against the US.

"When we were going to talks with the Taliban, the US derailed the process by carrying out adrone strike," he accused.

The PTI Chairman expressed concern over the surging prices of essential commodities. Heasked the Prime Minister Nawaz Sharif to take measures for controlling inflation in thecountry. He further asked the PM to stay in the country in the prevailing situation instead offoreign visits.


Pakistan wants peace to prevail with India:SartajNovember 11, 2013

Prime Minister's Advisor on National Security and Foreign Affairs, Sartaj Aziz, has said hiscountry wants peace to prevail between Pakistan and India, adding that efforts are beingmade in this regard. He said this while talking to media following his arrival at New Delhi onSunday. The advisor would attend a two-day Asia-Europe Foreign Ministers meeting thatwould begin in New Delhi on Monday (today).



During his visit, Sartaj Aziz would hold talks with Indian External Affairs Minister, SalmanKhurshid, and his Indian counterpart Shiv Shankar Menon on the sidelines of the event.

Sartaj Aziz will also hold a series of bilateral meetings with his counterparts from China‚Bulgaria‚ France‚ Germany‚ Romania‚ Spain and Slovak Republic‚ besides Kashmiri leaders.

Copyright Independent News Pakistan, 2013

Indian Prime Minister to missCommonwealth summitNovember 11, 2013

Indian Prime Minister Manmohan Singh will skip this week's Commonwealth summit in SriLanka, the foreign ministry said Sunday, as pressure grows for a boycott of the event overalleged war crimes by Colombo. Singh sent a letter to Sri Lankan President MahindaRajapakse on Sunday telling him of his decision not to attend the Commonwealth Heads ofGovernment Meeting (CHOGM), which has become mirred in controversy over demands forColombo to address the allegations.

The prime minister was "unable to attend personally" the 53-nation summit which Sri Lankais hosting from November 15-17, foreign ministry spokesman Syed Akbaruddin told AFP.

Singh's move is seen as bowing to pressure from India's own large population of ethnicTamils to stay away in protest at the alleged massacre of Tamil civilians by Sri Lankan forcesin the final months of the Tamil separatist war in 2009.

Several ministers from within Singh's government had urged him to stay away from theevent, amid concerns about upsetting Tamil voters - an important constituency - monthsbefore India holds national elections.

Singh is sending his top foreign official, External Affairs Minister Salman Khurshid, to headthe Indian delegation.

Sri Lankan Foreign Minister Gamini Lakshman Peiris said Singh's decision was not a setbackfor the hosts.

"If he came, we would have been very happy. But he has taken this decision consideringdomestic political compulsions," Peiris told reporters in the southern town of Hambantota.

"But it is not going to diminish the success of the CHOGM in any way."

Canadian Prime Minister Stephen Harper has already announced he would boycott thesummit, to protest at Sri Lanka's failure to investigate its troops over allegations they killedup to 40,000 civilians in 2009.

British Prime Minister David Cameron has said he will attend, but has pledged to push for aninternational investigation into the allegations of war crimes.



Cameron said earlier Sunday that he would put "serious questions" to Rajapakse, afterwatching a "chilling documentary" about the events of 2009 that shows footage of allegedwar crimes.

"It (the documentary) brings home the brutal end to the civil war and the immense sufferingof thousands of innocent civilians who kept hoping that they would reach safety, buttragically many did not," Cameron said.

"I will raise my concerns when I see President Rajapakse next week in Colombo.

"And I will tell him that if Sri Lanka doesn't deliver an independent investigation, the worldwill need to ensure an international investigation is carried out instead."

Sri Lanka responded by repeating its denial that its troops committed any such abuses.

"If a foreign head of government raises any issue with us, we will respond appropriately,"Rajapakse's spokesman Mohan Samaranayake told AFP.

"We deny that there were war crimes. What we tell them is, please provide the evidence andwe will look into it."

United Nations rights chief Navi Pillay last month warned Sri Lanka to show clear progresstowards reining in rights abuses and investigating the suspected war crimes by next March, orface an international probe.

India has 62 million Tamils in its southern state of Tamil Nadu. They share close religiousand cultural ties with their Sri Lankan counterparts.

The ruling Congress party is keen not to alienate potential supporters with elections due byMay 2014.

Singh's move comes amid concerns about a crackdown in Sri Lanka against journalists, rightsactivists and others before CHOGM. Sri Lankan immigration authorities on Sunday brieflydetained an Australian and a New Zealand politician who were making a fact-finding missioninto alleged rights abuses.

Immigration officials held Australian Senator Lee Rhiannon and New Zealand MP Jan Logieat their hotel shortly before they were to hold a press conference about their mission, anopposition lawmaker said.

The pair were questioned about alleged visa violations before they were allowed to leave andfly home, officials said. The move came less than two weeks after Sri Lanka kicked out twoAustralian media rights activists who were meeting local rights activists.

CHOGM is held every two years. Britain's Prince Charles will represent his mother QueenElizabeth II, who is head of the bloc of mainly former British colonies.

Copyright Agence France-Presse, 2013



Rangers can keep suspect in custody for 90daysNovember 11, 2013

The powers of Rangers have been enhanced under the Anti-Terrorism (Amended) Act,according to a notification issued here on Sunday. The Rangers will now have powers to keepthe custody of any accused/suspect for 90 days for investigation purpose with the permissionof the concerned court.

The Rangers have also received powers to shoot in case of resistance by any accused/suspect. Besides, the Sindh government has further extended the policing powers of Rangersfor four months in Karachi.

Copyright Associated Press of Pakistan, 2013



Taxation: Pakistan

Officials asked to resolve transporters'complaintsNovember 11, 2013

Sindh Minister for Transport Mumtaz Khan Jakhrani has directed the Secretary Transport toconvene a meeting of goods transporters immediately and resolve their issues to end thestrike. According to a handout issued here on Sunday, taking notice on the strike called bygoods transporters, the Minister asked the officials to resolve the complaints of thetransporters related to Sindh Government with the consultation of their representatives.

It was pertained that the trade activities of the country was suffering huge financial losses dueto goods' transporters strike which was entered into fifth day on Sunday, which resulted inpiling up of import and export shipments at the ports. The transporters were demanding toabort the decision to impose Income Tax and provide protection to their vehicles on roads.


BOPET film projects: Rs 8 billioninvestment at stakeNovember 11, 2013

IQBAL MIRZA

The import of BOPET film at a concessionary duty of 5 per cent is not only causing billionsof rupees loss to the national exchequer and draining out foreign exchange reserves of thecountry, it would ultimately kill the Rs 8 billion investment made in the two BOPET filmproduction projects as recently as 2012.

According to stakeholders here the Federal Board of Revenue is reportedly consideringreversion of the concessionary duty on BOPET film, which was provided due to lack of localmanufacturing in the past.

It is learnt that recently ECC did not agree to the proposal of partial (1/3rd) withdrawal ofconcessionary duty on BOPET film import as it was not in line with duties on otherpackaging films and did not fully support the local pioneer industry of BOPET film. Now acommittee has been formed to discuss this issue and put forth the facts of the case.

The salient facts, stakeholders said are as follows:

There are three films, BoPP, CPP and BOPET, which are used in combination with eachother for packaging film. The duty on all three films is 20 per cent (while anti dumping dutiesare also applied on BOPP). As per SRO 565, the duty on BOPET film was allowed at



concessionary rate of 5 per cent in the year 2006 when there was no local production inPakistan whereas effective duty on BOPP film still remains @ 20 per cent. BOPP is producedin Pakistan for the last 10 years while BOPET was so far not produced in Pakistan.

Two projects for the local production of BOPET film have been recently set up and are inproduction for the last one year with sufficient capacity to cater to the domestic demand of allvarieties of BOPET film. The two projects are estimated to have been set up at a cost of Rs 8billion combined (US $80 million). At the time of establishment of the projects FBR viewwas that only when local manufacturing of BOPET film commences, additional concessionon imported BOPET film will be removed and effective duty will revert to 20 per cent as perstatutory duty in tariff, as in the case of CPP and BOPP films.

However, stakeholders said the concession has not been withdrawn till date. Converterscontinue to import BOPET film at a concessionary duty of 5 per cent, causing billions ofrupees loss to the national exchequer and drain of foreign exchange reserves of the country.In addition, local investment to the tune of Rs 8 billion (US $80 million) made as recently as2012 is being threatened due to the influx of imported BOPET film at a time when such sizeof investment in non-power industrial sector is difficult to come in Pakistan. Powerfulconverters as well as manufacturers of competing films are behind the move to push localBOPET manufacturers towards bankruptcy.

The Engineering Develop-ment Board, Ministry of Industries has verified that BOPET film isbeing manufactured locally since second half of 2012.The competing imports BOPET filmamong other countries is produced by two Indian groups in UAE whereby the BOPET filmcan reach Pakistan within 3 days and if done so at concessionary rate of 5 per cent duty willpush the Pakistan BOPET film manufacturers towards bankruptcy.

The intermediate raw material as well as basic raw material is also produced in Pakistan. Thepromotion of imports at concessionary rate will circumvent and hurt the entire chain ofindustries as well as unnecessarily drain the foreign exchange reserves of the country, theysaid.


Business community: tax relief measuresannouncedNovember 10, 2013

SOHAIL SARFRAZ

The government on Saturday accepted a number of demands of the business community anddecided not to access bank accounts of National Tax Number (NTN) holders filing incometax returns, reduced penalty for non-filing of returns from Rs 50,000 to Rs 10,000; wouldaccept declarations of Income Support Levy and issue exemption certificates to importers forsix months under section 148 of the Income Tax Ordinance 2001.

Sources told Business Recorder here on Saturday that the government has agreed to tax reliefmeasures for the business and trade community during a meeting of chambers and federationswith the government high-ups including Chief Minister Punjab Shahbaz Sharif, Finance



Minister Ishaq Dar, FBR Chairman Tariq Bajwa and other senior tax officials at Lahore.

The government has also decided to give major relief to taxpayers and mandatory filing ofwealth statement has been relaxed and only those taxpayers shall submit wealth statementwhose taxable income exceeds Rs 1 million. Earlier through finance Act 2013, it was mademandatory for all taxpayers to submit wealth statement irrespective of quantum of theirincome declared in tax returns.

Some of the anti-documentation measures agreed by the authorities included reduction inpenalty for non-filing of returns. It has been agreed to reduce the penalty for non-filing ofincome tax returns from Rs 50,000 to Rs 10,000. In budget (2013-14), the FBR has raisedpenalty for non-filing of income tax returns and statements. A minimum penalty of Rs 20,000/- and a maximum penalty of fifty percent of the tax payable was provided for non-filingof return u/s 114 within the due date. In cases, where no tax is payable a penalty of Rs20,000/-shall be levied for non filing of return.

According to sources, the meeting also discussed the section 165A of the Income TaxOrdinance 2001 introduced through Finance Act, 2013 relating to the online access to bankscentral database containing details of its account holders. In this regard, the government hasalso agreed that the FBR will not access bank accounts of the NTN holder filing income taxreturns. The compliant taxpayers have been facilitated. The provision of access to bankaccounts has been restricted to the persons operating out of the tax net.

Fulfilling another demand of the business community, the government has also agreed thatthe FBR will not question the amount declared in the Income Support Levy (ISL) form. Theamount deposited as ISL would be acceptable to the tax department and no question would beraised.

To facilitate importers, it has also been agreed that exemption certificate under section 148 ofthe Income Tax Ordinance 2001 would be issued for a six months period instead of quarterlybasis, sources said. To relax harsh conditions of the Active Taxpayer List (ATL), sources saidthat the government has also agreed that now only those taxpayers would be taken out ofATL who would fail to file two consecutive sales tax returns. Initially, the condition wasrestricted to one return to ensure compliance. The non-filer of one sales tax return wasexcluded from the ATL and now the condition has been relaxed for the business and trade.

It is expected that the measures would be implemented through formal notifications andclarifications next week, sources added. The government also discussed relief to businesscommunity by not inquiring about the source of investment made in new industrialundertakings under Income Tax Ordinance 2001. However, no final decision was taken onthe said proposal.


Customs seizes smuggled goodsNovember 10, 2013

The staff of Anti-Smuggling Organisation, MCC Preventive Karachi had seizedcontraband/smuggled/non-duty paid goods recovered from a passenger bus bearing No BSA-



853 valuing Rs 30,00,000 containing goods like foreign origin cigarettes 78,000 packetsvaluing Rs 31,22,500, Indian gutka 477800 pouches valuing Rs 47,78,000, tyres 40 nosvaluing Rs 1,71,872/-, face creams 142 nos valuing Rs 43200, cooking oil 82 cans(Malaysian) valuing Rs 94,530 and cloth weighing 870kgs etc valuing Rs 4,11,274.

-PR


Lying in customs warehouses: FBRcompiling arms & ammunition dataNovember 10, 2013

The Federal Board of Revenue (FBR) is in process of compiling arms and ammunition datastored in the customs warehouses along with seized weapons to collect authentic informationon national level. Sources told Business Recorder here on Saturday that the FBR has issuedinstructions to all Chief Collectors and Collectors of Customs regarding disposal of arms andammunition.

According to the FBR''s instructions to the field formations, Collectors of Customs shouldimmediately apprise the board about arms and ammunition seizure cases with thespecifications of arms and ammunition lying in the warehouses. The field formations shouldalso take up the matter on most urgent basis. The FBR has also provided a performa forcompilation of the said data. It included year-wise (2010-11; 2011-12; 2012-13 and 2013-14)description of arms; description of ammunition, seizure number; quality value and remarks ofthe collectors.

The FBR has issued instructions in line with the orders of the Supreme Court, FBR''sdirections added. It is important to mention that the one-member Commission report on armsand ammunition has revealed that the commission during the visit to the strong rooms in EastWharf - KPT, observed that a number of consignments of Arms and Ammunition imported in1994 and onward were still awaiting clearances on payment of duty and taxes or otherwisedisposal. It was also witnessed that the wooden packing of a number of consignments ofArms and Ammunition imported from China dismantled reportedly during the voyagebecause of sea storm. Therefore, the Arms and Ammunition of different consignments gotmixed-up and was repacked by KPT Authorities after unloading without any supervision ofthe Customs Department. No stock-taking has been done so far to ascertain whether anyquantity of Arms and Ammunition was missing.

The import of arms and ammunition into the country is regulated by the Federal governmentthrough the Import Policy Order (IPO) as amended from time to time, read with the Ministryof Commerce letter bearing F.No 2(8)/2004.RO (Imp.1/AC(Imp), dated 25.01.2005. As perthe serial nos. 37-38 of Appendix-A of the IPO-2013, the import of arms and ammunition ofcertain bores and calibers as mentioned vide the serial nos. ibid is prohibited, such asrevolvers and pistols of more than 0.46 bore, semi-automatic rifles of 7.62mm, rifles of 8mm- 9mm, etc. Conversely, the arms and ammunition of other, non-prohibited bores and calibersare importable as per serial nos. 63-67 of Appendix-B of the IPO-2013. However, accordingto the procedure notified by the Ministry of Commerce only authorised dealers can import the



non-prohibited bore arms and ammunition on commercial basis while individual importerscan bring in a limited quantity of such weapons in their personal baggage, provided thepassenger declares the item to Customs on arrival at the airport of entry and holds a validimport authorisation from the Ministry of Commerce as well as a license issued by therelevant provincial Home Department, commission added.


Corrupt tax officials: FBR launchescrackdownNovember 09, 2013

The Federal Board of Revenue has launched a crackdown on corrupt tax officials in the fieldformations and gave exemplary punishments to those colluding with tax evaders to causeirreparable loss to the exchequer. It has been reliably learnt on Friday that the Board hasinitiated the exercise on national level on explicit instructions of the tax authorities to takeextreme action against the corrupt officers who are creating bad impression of the taxdepartment among public.

The job has been assigned to the FBR''s investigators having expertise and intelligencenetwork at field level. The priority would be given to those cases where collusion has takenplace between the taxpayer and tax officers to cause revenue loss. The perception of the taxmanagers could only be changed by taking necessary action against officers flouting the law.The work has already started and intelligence network has been actively utilised to pinpointtax officials in field formations who are facilitating tax evaders and tax dodgers.

In next one month, the FBR will prove corruption against officials involved in corruptpractices and subsequently issue suspension orders after providing them the opportunity tohave their viewpoint. The FBR wanted to give a clear and sound message to the entire taxmachinery that the tax officers involved in collusion would not be spared. The exercise wouldnot distinguish between lower grade - 14/15-16 officials or gazetted high grade employees ofBPS 17 and above. Action sans discrimination would be taken against all such officials.

Sources said the FBR is in the process of collecting solid evidence from the field formationsby using inside information and intelligence network across the country. The seniormanagement at the FBR is very much serious to change the perception of the tax managersfor which strict action is necessary against the corrupt. The seriousness of the exercise isevident from the fact that the FBR is even trying to collect pictorial or videos as evidence ofcorruption. In Karachi, a tax official has allowed a taxpayer to sit on his official computer forfiling of sales tax refund application, etc. The FBR got the pictorial evidence and tooknecessary action against the official. Such kind of collusion would be seriously viewed by theinvestigators and stern action would be taken against corrupt elements.

Recently, a deputy commissioner Inland Revenue of Karachi has been suspended on chargesof corruption. Moreover, Inland Revenue Audit Officers have also been suspended. Theexercise is in full swing and further action is expected in next 3-4 weeks, sources maintained.The FBR will time and again inform the Ministry of Finance about the ongoing action againstthe corrupt tax officials, sources added.



In last quarter of 2013-14, FBR Chairman Tariq Bajwa had informed the Senate StandingCommittee on Finance that the Board has taken steps to check corruption in the taxmachinery and systems such as Web Based One Customs (WeBOC) and Computerised Risk-Based Evaluation of Sales Tax (Crest) would bring improvement in customs clearance andrefund payments. The FBR had appointed best tax officials with goods reputation in the fieldformations. The electronic system including WeBOC and Crest would improve customsclearance processes and sales tax refund payments to the registered persons. The Crest is alsohelpful in conducting meaningful post refund audits of the registered persons. The complaintsin refunds would also be drastically reduced following implementation of the Crest, he added.




Business & Economy

Goods transporters strike enters 4thconsecutive daySunday, 10 November 2013 21:06

Posted by Imaduddin

KARACHI: The Goods transporters continued their strike on Sunday for yet another day inprotest against an increase in income tax and the frequent incidents of extortion, abductionand violence against them.

The country was suffering huge financial losses as Import and export activities countrywideon all the ports have been severely hampered due to the continuing strike of goods transportcarriers. The transportation of all kinds of goods within the country was also suspended.

General-Secretary of Karachi Goods Carriers Association Muhammad Shoaib Khan told thePPI that their strike would continue until their major demands were not met by thegovernment. He said that they had given government a 16-point agenda but their majordemand included federal government to withdraw an increase in income tax of Rs300.

Shoaib Khan lamented that their drivers and other crew of goods transport carriers facedincidents of robbery, abductions and extortion and also deprivation of their loaded vehicles.He said that goods transporters had not been given financial compensation for their vehicles,which were torched and damaged in violent protest against assassination of former PrimeMinister Benazir Bhutto in December, 2007.

He said that hundreds of our containers have been lifted by the civil administration of Sindhand Punjab for blocking roads and streets during Muharram processions.

Shoaib Khan said that provincial government and commissioner Karachi had contacted theirassociation members and assured them that their problems regarding lawlessness andviolence would be resolved shortly. Though, he said that they would continue their strike tillfederal government withdraws an increase income tax.

Copyright PPI (Pakistan Press International), 2013

LCCI demands tax amnesty schemeSunday, 10 November 2013 20:18

Posted by Imaduddin

LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) has urged thegovernment to introduce 'Tax Amnesty Scheme' in order to bring non-taxpayers to the tax-network and increase country's tax to GDP ratio.



In an interview with the APP here Sunday LCCI Vice President Kashif Anwar Sheikh saidthat the non-tax-payers should be brought into the tax-net with a penalty of 2 to 3 percent taxwithout asking about the sources of income, adding that the amnesty scheme would addbillions of rupees to the national exchequer.

The LCCI vice president said that Pakistan lags behind in the tax to GDP ratio in the regionwhich should be at least 15 percent of the GDP.

He called upon the FBR to reintroduce the fixed tax on an income of Rs 5 million turnover,stressing that the existing limit of the fixed tax should be increased to Rs 10 million. Sheikhsaid that the step would bring new taxpayers into the tax-net but the government should notdemand conduct audit of the accounts of the businessmen who would qualify in the tax-netunder the new system.

To a question, the LCCI office-bearer said that the current tax system should be made moresimple and easy and the businessmen, traders should be facilitated in the filing of theelectronic tax returns.

Sheikh Kashif also demanded of the government to simplify the sales tax registration systemin order to assist the businessmen, adding that the sales tax registered traders had to work aswithholding tax agents which had added to their problems.

Lauding the efforts of the Prime Minister Muhammad Nawaz Sharif and Chief MinisterMuhammad Shahbaz Sharif to overcome energy crisis in the country, the LCCI vice presidentsaid that the masses and the industry need cheap electricity, adding the government shouldstart hydel power projects and new dams in the country.

Regarding GSP plus status to Pakistan, he said that access to the Pakistani products in theEuropean markets is a great achievement of the present government as duty-free access to ourtextile products would increase exports, adding that access to the European markets couldonly be meaningful if production cost of the textile industry is low.

Vis a vis Pak-India trade, LCCI vice president said the mutual trade between the twoneighbouring countries could only expand if the non-tariff barrier is lifted and the visa policyis relaxed.

To a question, he said that the Pakistani traders should not be wary of the trade with India,adding if India would get access to 180 million people market, Pakistani traders wouldexplore 1.25 billion people Indian market.

He opposed the idea of allowing Afghan transit trade facility to India, saying the decisionmight prove detrimental to country's exports.

Copyright APP (Associated Press of Pakistan), 2013



Shahbaz greets LCCI for establishingMediation CentreSunday, 10 November 2013 10:52

Posted by Shoaib-ur-Rehman Siddiqui

LAHORE: Punjab Chief Minister Shahbaz Sharif on Saturday appreciated the LahoreChamber of Commerce and Industry for establishing internationally recognized MediationCentre at its premises and enhancing its scope to other chambers of Punjab.

The CM was speaking at signing ceremony of MoUs among LCCI and five other chambersof commerce and industry in Punjab. Provincial Law Minister Rana Sanaullah, MNA PervezMalik, LCCI president Engineer Sohail Lashari, Senior Vice President Mian Tariq Misbah,Vice President Kashif Anwar, Saima Zuberi, Reshma Aftab from the IFC and RossForgousan from DIFD were also present at the signing ceremony.

The LCCI President Engineer Sohail Lashari inked MoUs on behalf of the LCCI while TariqBilal, President Gujrat Chamber of Commerce and Industry, Sohail Bin Rashees, PresidentFaisalabad Chamber, Dr Sarfraz Bashir, President Sialkot Chamber, Dr Shimial Dawood,President Rawalpindi Chamber and Nauman Salahuddin represented Gujranwala Chambersigned MoUs. Shahbaz said that the establishment of Mediation Centre would go a long wayin strengthening of a mechanism of out of court settlement of disputes in the province ofPunjab.

He said that the International Finance Corporation and Department for InternationalDevelopment (DFID) have taken a step in right direction that would help increase foreigninvestment in Pakistan.

Shahbaz further said that Punjab government would extend every possible help to LCCI forstrengthening the mechanism of mediation in the province and necessary legislation would bedone soon to give legal cover to the process. Speaking on the occasion, MNA Pervez Maliksaid that the LCCI Mediation Centre would enable the business community to get theirdisputes resolved in shortest possible time.

Lashari shared with the audience that LCCI is the first and only chamber in Pakistan that hasa panel of more than 40 internationally accredited mediators having diverse professionalbackgrounds who are trained by the Centre for Effective Dispute Resolution, UnitedKingdom.

Qualified mediators are readily available at LCCI Business Dispute Resolution Centre to helpdisputing parties settle general contract disputes and relating to trade and tax in particular.President LCCI acknowledged the role of trained and registered mediators towards effectivedispute resolution.

President LCCI also added that this is part of a series of joint initiatives of LCCI, IFC-WorldBank Group, and the Department for International Development of the United Kingdomaimed at improving investment climate in Punjab and across Pakistan. President LCCIexpressed his concerns that Contract Enforcement remains weak in Pakistan. More needs tobe done. This is essential for building investor confidence. He urged participants and media



as well as invited all chambers and associations to join hands for promoting the use ofmediation over litigation. This is critical for Pakistan and Punjab to be considered a business-friendly investment destination.


IT services export fetch US$ 1.250bn in lastfive yearsSaturday, 09 November 2013 17:26

Posted by Imaduddin

ISLAMABAD: The exports of Information Technology services have contributed US $ 1.250billion to national kitty during last five years.

The year-wise break-up showed that during 2008-09 the IT exports were US $ 201.903, in2009-10 US $ 204.763 million, in 2010-11 US $ 235.334 million, in 2011-12 US $ 273.814million and and these exports touched 333.511 million mark in 2012-13.

According to Ministry of Information Technology and Telecommunications which quotedState Bank of Pakistan (SBP) data here on Saturday, there are over 100 countries that arepresently procuring IT services from Pakistan.

United States is the major destination for exports of IT services from Pakistan accounting forover 40 percent of the exports.

The other major countries procuring IT services from Pakistan in order of exports are UnitedArab Emirates (UAE), United Kingdom (UK), Netherlands, China, Bahrain, Singapore,Canada, Germany, Norway, Saudi Arabia, Japan, Thailand, Malaysia, Switzerland, Australia,Denmark, Sweden, Ireland and South Korea.

The Ministry has also set targets for exports of IT services for next five years which includeUS $ 414.389 million for 2013-14, US $ 530.418 million for 2014-15, US $ 689.543 for2015-1630, 910.197 million for 2016-17 and 1,229.738 million for 2017-18. The total targetfor next five years is US $ 3,774.285 million.

There are 17 private enterprises in Pakistan which have achieved target of annual exports ofIT services, exceeding one million US Dollars, an export data reported to Pakistan SoftwareExport Board (PSEB) by its member companies said.

With regard to steps being taken to attract foreign manufacturing companies of telecomsector for establishing manufacturing facilities in the country, the Ministry said provision oflocal manufacturing is incorporated in new policy directive for introduction of NextGeneration Mobile Services in Pakistan.

The licensees of these services will encourage and facilitate local manufacturing, assemblingand development of telecom equipment, applications, transfer of technology and Research &Innovation in Pakistan.



A provision regarding promotion of local manufacturing of telecom equipment in Pakistan,from part of the revenue generated by international incoming traffic, has been included in thepolicy directive of International Clearing House (ICH) Exchange.

Copyright APP (Associated Press of Pakistan), 2013



Cotton and Textiles: Pakistan

Transporters' strike: exporters fear lossesworth billionsNovember 11, 2013

Exports orders worth billions of rupees are at stake due the ongoing strike of goods'transporters, said Pakistan Readymade Garments Manufacturers and Exporters Association(PRGMEA) Co-ordinator Ijaz A Khokhar.

Talking to Business Recorder here on Sunday, he said it was unfortunate that no attempt hadso far been made by the government for negotiation with the transporters to resolve the issue."Pakistan will face serious economic setback if the situation remained the same. Theexporters will face huge losses in case the export orders are cancelled," he warned.

Ijaz said that the textile sector was already facing multiple problems and the transporters'strike had added to its woes.

He urged the government to take immediate steps to resolve the issue in order to avoidserious economic disaster.

He also asked the Sindh Chief Minister and other concerned authorities to intervene andpersuade the transporters to call off their strike in the larger national interest.


Punjab government earmarks land forgarments cityNovember 11, 2013

The Punjab government has selected land to set up garments city over 1000 acres near KalaShah Kaku Motorway. All modern facilities will be provided to the textile industry in thegarment city under one roof. This project of vital importance will be given a final shape soonas it will have a far reaching impact on the textile especially garments sector after achievingGSP plus status by Pakistan.

This was stated by Punjab Chief Minister Shahbaz Sharif while addressing a meeting held toreview the progress on the project of setting up garments city, here on Sunday. Advisor toChief Minister Dr Ejaz Nabi, Chairman Planning & Development, Secretaries Industries andLabour, Vice Chairman Punjab Investment Board, office-bearers of Pakistan GarmentsAssociation and concerned officials were present on the occasion.

The meeting reviewed in detail the project of setting up garments city over 1000 acre of landnear Kala Shah Kaku Motorway. The Chief Minister said that special incentives would be



offered to the foreign and local industrialists for investment in the garments city.

While giving approval to the project of construction of labour colony and evolving businessplan for the garments city, the Chief Minister constituted a special committee headed byChairman Planning & Development which will submit its final recommendations afterreviewing all aspects of the master plan of the project.

The committee will comprise of Secretaries of different departments as well as three office-bearers of textile association. Shahbaz Sharif said that garments city would be establishedunder public-private partnership and a centre of excellence would also be set up for training.

After achieving GSP plus status by Pakistan, the export of textile sector will increaseconsiderably and the garments city is an excellent project which will generate thousands ofnew job opportunities.


Polyester value chain: 'NTC probe intoduty structure inappropriate'November 10, 2013

MUSHTAQ GHUMMAN

Polyester Staple Fibre Manufacturers Group - members Ibrahim Fibres Limited and ICIPakistan Limited have rejected investigations of National Tariff Commission (NTC) into dutystructure in polyester value chain, saying that the probe is based on faulty data.

In a letter written to Executive Director General, Trade Policy and Domestic Commerce,Ministry of Commerce, Azam Muhammad, the group said that they approached the Ministryto express its reservations on the inaccuracy of data and erroneous methodology used in thestudy/ investigation by the NTC which has led the NTC to reach incorrect conclusions, ie, anoutcome which can be extremely damaging to the continued survival of domestic polyestermanufacturers, who significantly invested on the basis of the current government policy oftariffs for the textile value chain.

The firm is of the view that all relevant government departments including the Ministry ofCommerce, in particular, must not ignore the serious implications of this report on $200million investment undertaken by the country's largest polyester staple fibre producer,Ibrahim Fibers Limited (IFL) in a capacity expansion project, which came online at the startof the current year.

"The scope of the study is also irrelevant as it is absolutely not reflective of the currentdomestic and regional market realities and as such contrary to the report's conclusions, it isthe PSF industry which requires an increase in protection to survive the extremely difficultbusiness environment prevailing right now," the company added.

According to the letter, latest financial results of the largest stakeholders in the value chain(Lotte, FL & ICI) paints a picture in stark contrast to the NTC's findings in its 2013investigation report. The results are clear reflection of improved business conditions in the



PTA industry with earnings which are much higher than 2012 levels, while the PSF industryis making losses to the tune of hundreds of million rupees due to regional industry's down-cycle and unchecked dumping of polyester fibre by Chinese exporters. This difference in theNTC's assessment and actual business reality partly originates from their analysis of a timehorizon (2010-2012) which has become irrelevant now because of changed marketconditions.

In 2012, the PTA was entering through down cycle and the troubles of the PSF industry hadjust begun. Since then, the PSF market has been on a constant decline at the regional leveland more so at the domestic level, bringing it to present day with a clear dent of thisdowncycle visible in ICI and IFL financial results. Furthermore, the investigation reportcontains the following errors of assumption, data selection, facts and omissions, which in ourview render the conclusions drawn invalid and we seek clarity, thereof, from the NTC.

I- The report states the imports of the PSF are subject to anti-dumping duty ranging between0 and 10.44%, a fact which was valid for a short time window between 2009 and 2010.Presently, in the absence of any dumping protection, the PSF industry is fully exposed todumped imports from China coming in sizeable amounts.

II- The report ignores to point out the continuous increase in imports as a percentage ofdomestic production, pointing towards lack of protection to the domestic PSF industry. III-The report concludes that since none of the cost heads or price are in control of the PTAproducers and there is a linkage between customs duty and profitability. An analysis ofcustoms duty and profits of PTA (now Lotte Chemical Pakistan Ltd) shows no correlationbetween the two variables. The PTA made serious losses with 25% protection while itenjoyed super-normal profits even at a 3% duty in 2010-11. In their base country, the tariffprotection available to the PTA industry is 0%, just like in many other countries, by theviability of the industry remains strong.

IV- The report compares cost of production over 2011 and 2012. It is concluded that theprofit ratio remained stable over the two years. The company has also provided tables ofincome which clearly show a decline in profitability of the business since 2010 with 2013being one of the worst years, making the NTC's conclusion erroneous.

V- The report has incorrectly stated that the results of IFL are in line with the changes ininternational market, while other units' results are not. The company has pointed out that theregional PSF margins have been on a constant decline since the end of 2011. A graph, basedon data from PCI Fibers (one of the largest and most well reputed global consultants on thepolyester value chain) to that effect has already been presented to the NTC which isabsolutely in line with international market trends and should be analysed for tariff decisionpurposes.

The company is of the view that the analysis of the NTC is completely invalid and should notbe used to draw any conclusions whatsoever.

VI- The report uses China's import prices of the PTA, MEG & PSF to determine trends in thePSF margins over the years. The company has advised to the NTC not to use such an analysisto measure an industry's profitability trends as it is superficial and arbitrary. The prices do notaccurately reflect the actual market prices and the margins thus achieved do not reflectproducers' real margins. Furthermore, the analysis is erroneous on grounds of incorrect dataselection. Though China's import prices of the PTA & MEG are reflective of internationaltrends owing to China being a net importer of these raw materials, China's import prices of



the PSF do not reflect the true prices of the PSF in international market, as China is by a greatmargin a net exporter of the PSF and any PSF it imports is of specific grade (which is ofhigher price and follows a different market trend).

The NTC has also claimed that the PTA is enjoying a greater Effective Rate of Protection("EPR") than the PSF industry, in violation of the cascading principle, which entails higherprotection to downstream industries. The contender company argues that not only does thereport omits to make this observation, it goes further, suggesting that an increase in tariffwon't have a significant impact on downstream industry. Discussing the same issue, thereport makes an error of fact suggesting that an equal increase in duties of the PTA and PSFwould be more beneficial to the PSF. The NTC's study clearly shows that a 1% increase induty of the PTA would increase its EPR by 7% while the same change in the PSF's dutywould increase its EPR by 4%.

The company's claims are based on current losses, the industry is on the verge of closure andthe damage of such an eventuality on foreign exchange, employment and tax collectionwould be much greater.


Reaping GSP Plus benefits: energy, law &order vital prerequisites: PRGMEANovember 10, 2013

Pakistan Ready-made Garments Manufacturers and Exporters Association (PRGMEA) haslauded the government for achieving favourable support from the International TradeCommittee of EU, which has approved the duty-free status for Pakistan leading to boost theexports of the value-added textile sector and create job opportunities.

PRGMEA (NZ) Senior Vice Chairman Jawwad A Chaudhry appreciated the efforts of PMNawaz Sharif, Punjab CM Shahbaz Sharif, Governor Chaudhry Sarwar, State Minister forCommerce and Textile Industry Khurram Dastgir and Commerce Secretary Qasim Niaz foreffective and successful diplomatic initiatives.

Jawwad urged the government to fulfil energy needs of the textile industry, besidescontrolling law and order, as the two issues had been hitting hard the Punjab-based value-added industry and GSP Plus status would be of no use in present circumstances.

Besides improving law and order, controlling terrorism and providing non-stop gas andelectricity supply, the government would have to relax import policy to empower value-added textile industry to get the maximum benefit of GSP Plus Status, as the country had noraw material except cotton, he noted.

Jawwad Chaudhry lamented that Pakistan could utilise only three textile categories out oftotal 73 types relaxed by the EU countries for duty-free import from Pakistan in 2013. Withstrict import policies in Pakistan, the local garment industry was not fully prepared to takeadvantage of duty-free access to the EU market under GSP Plus status mainly due to shortageof raw material, he added.



PRGMEA leader urged the European Parliament's plenary session meeting during secondweek of December, 2013 to finally pass the resolution in favour of Pakistan which is afrontline state and ally of the US and EU in its fight against terrorism. He said exporters fromvarious industries in Pakistan were expecting the GSP Plus access to European markets,which promised huge potential for multiplying the country's current exports and appealed tothe authorities to comply with all the requirements of GSP Plus.

He also pointed out the condition that the export market share of any product should notexceed the six percent ceiling of import of European Union. He disclosed that most of thetextile items included in the list of GSP plus items have already crossed the six percentceiling set by the GSP plus condition.

Jawwad expressed his disappointment over the FBR delaying tactics, as no company had getrefund for two percent sales tax on purchases of raw material for export since February 2013,while refund claims of billions of rupees of 2010 were also pending yet. He said that revenuegeneration through taxes was not a good approach by keeping the value-added textileindustry hostage.


GSP plus status, rains help cotton prices torecover slightlyNovember 09, 2013

The Generalised System of Preference (SGP) and expectations for winter rains came torescue as prices moved up modestly on the cotton market on Friday, dealers said. The officialspot rate was higher by Rs 50 to Rs 6400, they said. Price of seed cotton in Sindh per 40 kgwere unchanged at Rs 1600-2900, in Punjab rates sustained overnight levels at Rs 2600-2950,dealers said.

In the ready session, trading activity improved as about 18,000 bales of cotton changed handsat Rs 6400-6000, they said. There are a lot of expectations for the European Union (EU) tradeconcession but traders were looking some worried as they have no basic facilities to avail andutilise this concession. During the winter, there is shortage of gas supply, at the same time,electricity is also one of the major problems to deal with.

Cotton analyst, Naseem Usman said that the ginners were in loss, since the prices startedfalling but now they may not sell in a hurry, waiting for further rise in the rates. The millersand spinners will try to buy due to quality factor, he added.

Other dealers said that winter rains likely to damage production and quality, this factorinducing buyers to make forward purchasing. According to the Reuters, the NY cottonfutures eased on Thursday, giving back some of the previous session's gains as traderspositioned themselves ahead of the US government's monthly crop report and optionsexpiration on Friday. The most-active December cotton contract on ICE Futures US closeddown 0.31 cent, or 0.4 percent, at 76.76 cents a lb.



The following deals reported as 1600 bales of cotton from Khair Pur at Rs 6400-6450, 1400bales from Khair Pur (BCI) at Rs 6450, 2000 bales from Upper Sindh at Rs 6400, 400 balesfrom Daran Wala at Rs 6450, 400 bales from Faqirwali at Rs 6400, 400 bales fromHaroonabad at Rs 6400, 400 bales from Gojra at Rs 6425, 1200 bales from Chichawatni at Rs6450, 400 bales from Yazman Mandi at Rs 6450, 400 bales from Fort Abbas at Rs 6500, 400bales from Khanewal at Rs 6500, 400 bales from Liaquat Pur at Rs 6500, 800 bales from JanPur at Rs 6550, 1000 bales from Sadiqabad at Rs 6500-6600, 1800 bales from Rahim YarKhan at Rs 6550/6600, 2600 bales from Khan Pur at Rs 6600, 1000 bales from Rajan Pur atRs 6600, 200 bales from Fazil Pur at Rs 6600, 400 bales from Bakhar at Rs 6600 and 600bales from Mianwali at Rs 6600, they added.

===========================================================================The KCA Official Spot Rate for Local Dealings in Pak Rupees---------------------------------------------------------------------------FOR BASE GRADE 3 STAPLE LENGTH 1-1/32"---------------------------------------------------------------------------

MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL===========================================================================Rate Ex-Gin Upcountry Spot Rate Spot Rate Difference

For Price Ex-Karachi Ex. KHI. As Ex-Karachion 07.11.2013

===========================================================================37.324 Kgs 6,400 155 6,555 6,505 +50---------------------------------------------------------------------------Equivalent---------------------------------------------------------------------------40 Kgs 6,859 155 7,014 6,960 +54===========================================================================

PCGA threatens to shut all ginningfactoriesNovember 09, 2013

Pakistan Cotton Ginners Association (PCGA) has warned to shut all ginning factories acrossthe country if the culprits involved in Rajanpur robbery case would no be arrested. PCGAChairman, Mukhtar Ahmed Khan Baloch said that armed robbers snatched Rs 11 millionfrom a ginner of Fazilpur (Rajanpur) Syed Sham shah at gunpoint.

He said PCGA had already many times requested the Punjab government, Punjab IGP anddistrict police officers of cotton belt for the security and safety of ginners. He said neithersecurity measures were taken nor patrolling was increased.




Agriculture and Allied: Pakistan

Price volatility in world market: thinparticipation witnessed in first urea tenderNovember 11, 2013

RIZWAN BHATTI

A thin participation was witnessed in the first urea tender conducted by the TradingCorporation of Pakistan (TCP) for the import of 0.1 million tons, mainly due to pricevolatility in the world market. Overall some four international suppliers participated in thetender, out of which three submitted their offers for the supply of urea, while one biddersubmitted a regret letter.

Presently, Pakistan, India and Bangladesh are facing acute shortage of urea and have plannedto import millions of tons of the commodity from the world market to meet their domesticrequirements. Pakistan has already floated a tender for the import of 0.5 million tons, whileIndia also intends to import about 2 million tons of urea.

Sources said that ahead of this demand, urea prices in the world market were on the surge,and had gone up by $60-70 per ton during last three months. Urea prices have reached $350-360 per ton (Cost and Freight) in the first week of November, previously they stood at $290-300 in August.

The price volatility in the world market has caused thin participation of bidders in TCP''s ureaimport tender. Although, after the announcement, some 18 pre-qualified parties purchasedtender documents from the state-run grain trader for participation in urea tender, however,most of international suppliers avoided submitting bids in the first tender.

Sources said, "Presently urea prices in the world market are continually fluctuating and trendis on higher side, therefore the foreign suppliers were reluctant to participate in the tender."

"The international suppliers are closely monitoring the world market and accordingly willtake their positions as the TCP has to open four more tenders for the import of 0.4 milliontons of urea during this month," they added.

Last month, the Economic Co-ordination Committee (ECC) of the cabinet allowed import of0.5 million tons of urea to prevent shortage during Rabi season. The TCP was directed toimport the same quantity till December.

In the line with these directives, the TCP floated five international tenders, out of which thefirst tender was opened on November 8, 2013 at TCP head office.

In order to avoid speculation, the TCP invited bids from pre-qualified foreignsuppliers/exporters, already registered with the corporation, for the supply of urea in bulkthrough world-wide sources on Cost and Freight (C&F) basis. In response of the TCP''stender, some four parties participated in the tender, however one supplier namely M/s SwissSingapore submitted regret letter, while the remaining three quoted prices ranging $344.73



per ton to $348.95 per ton (C&F).

Lowest bid was submitted by the M/s CHS Europe Switzerland, which offered to supply100,000 tons of urea at $344.73 per tons (C&F). In addition, M/s Dreymoor Fertilizersubmitted a price of $348 per ton for supply of 100,000 and M/s Key Trade AG quoted aprice of $348.95 for same quantity.

Sources said that the quoted prices, in the first tender, were some $40-45 per ton higher thanprevious tender (conducted in August 2013), in which the TCP finalised deal for the importof 150,000 tons. The delay decision of urea import will cost millions of dollars additionalburden on the national exchequer as the commodity prices in the world market are on higherside, they added. As the lowest bid was conforming to technical specifications and terms andconditions of the tender the offer was accepted by the TCP and the contract for the supply of100,000 tons was awarded to the lowest bidder accordingly.

Four more tenders are lined up for the import of 0.4 million tons of urea. Next tender will beopened on November 11, 2013 (today) for import of 100,000 tons of urea, while the resttenders will be opened on 18th, 20th and 22nd of this month.


Tomato prices rise by 100 percent last weekNovember 11, 2013

Tomatoes prices have increased almost by 100 per cent during the last one week, bringing itsrate from Rs 60-70 to 140-150per kilogram. Tomatoes, used in a variety of food products andit is considered an important ingredient for home-made dishes, were available in the retailmarket at Rs60-70 per kg around one week ago. Consumers have expressed concerned overupsurge in prices of the edible items, saying it seemed that authorities concerned have given afree hand to the traders to fix the prices on their own.

General Secretary of Rawalpindi Fruit market Association Qadir Mir said that the increase inprices of tomatoes is due to gap between demand and supply.


KP collects Rs 312 million tobaccodevelopment cessNovember 11, 2013

The provincial government of Khyber Pakhtunkhwa collected Rs312 million tobaccodevelopment cess during the year 2013-14. The collected amount is being utilised on thedevelopment of the tobacco growing districts on the basis of the production of the crop. Theshare of the districts on the basis of tobacco produce during the year was Rs 162.98m forSwabi, Rs 37.90m for Mardan, Rs 38.03m for Charsadda, Rs 19.78m for Buner, Rs 14.5m forNowshera, Rs 19.49m for Malakand and Rs 19.32m for Mansehra.



Presiding over a meeting on tobacco cess, the Chief Minister, Pervez Khattak, has said thatcess was one of our few important income resources and hence its judicious and transparentuse for welfare of people and development of the province was need of the hour. He askedthe authorities to ensure its best utilisation in public interest, adding that priority should begiven to improve conditions of health and educational institutions and communicationfacilities throughout KP, especially in the tobacco growing areas. He said that providing basicamenities of life to the masses and ameliorating lot of the poor was top most priority of thePTI-led coalition government.


GAPC-Pakistan renamedNovember 11, 2013

Gold Art Promotion Council-Pakistan has been renamed as Gold & Gems Art PromotionCouncil-Pakistan (GGAPC-Pakistan). This change has been initiated through a resolutiontabled by Muhammad Zheshan Ibraheim, Vice-President (Gems sector) at a meeting heldunder the chairmanship of Muhammad Ahmad, President of the organisation.

The meeting through a resolution demanded of the government to conduct a survey in theNorthern Areas pf the country for the exploration of precious stones. "Pakistan's matchlessstones should be introduced in the international market so that we could earn foreignexchange for the country" GAPC-Pakistan suggested. This wealth is being wasted because oflack of proper planning. In this connection the GGAPC-Pakistan is ready to offer its servicefor this national cause, it added.


Russia seeks to invest in PSM: JatoiNovember 11, 2013

Federal Minister for Industries and Production Ghulam Murtaza Jatoi on Sunday said that thegovernment was committed to restore Pakistan Steel Mills' image and in this regard,comprehensive measures were being taken. The Minister said that Russia had shown interestto invest in Pakistan Steel Mills. He said that the sale of 26 percent shares of Steel Millswould produce positive results for making it profitable.

He said the government was seeking an appropriate company for supplying of raw materialsfor Pakistan Steel Mills. To a question, he said the government had set up an independentcommission for appointments of heads of different institutions to ensure transparency in thesystem. He blamed former governments for the plight condition of the institutions. Theminister said the government was making serious efforts for the protection of industry forprosperity of the country.




Pakistan has best buffalo breed: UVAS vicechancellorNovember 11, 2013

Vice-Chancellor of the University of Veterinary and Animal Sciences (UVAS) Professor DrTalat Naseer Pasha has said that despite an improper mechanism of semen production in thecountry and around 3.5 million poor semen doses, Pakistan has the best buffalo breedproducing 67 per cent milk from them. Talking to APP on Sunday, he said the private sectorwas producing 3.5 million semen doses against government's 2.5 million doses.

He deplored that it was very alarming that the quality of bulls being used for semen collectionwas inferior as the private sector was just doing the business without covering the aspect ofanimal genetics. There is no mechanism of check of the quality of semen produced by theprivate sector and there should be a system under which selected bulls should be used forsemen collection, he added.


Essential commodities: ACs directed to takeaction against hoardersNovember 10, 2013

DCO Noorul Amin Mengal ordered the Assistant Commissioners to check the Cold Storagesin the district and compile their data and stock for taking action against the hoarders ofessential commodities to save the poor masses from the exploitation of unscrupulouselements who stocked the items of daily use with the bad intention of creating shortage in themarket and sale them on higher prices.

He was presiding over District Price Control Committee meeting which was attended byofficers of different departments and representatives of grain, vegetables, fruits markets andwhole and retail sellers. The DCO said that the CM Punjab Muhammad Shahbaz Sharifissued strict directions to take stern action against the profiteers and directed to control theprices of essential commodities under new price control mechanism.

He asked the traders and shopkeepers to avoid unjustified profit and to extend co-operation tosupply essential commodities to the consumers on controlled prices. He directed the officialsto supervise the auction proceedings in the fruits and vegetables markets on daily basis forcontrolling the unfair raising prices of the communities. He directed the Price ControlMagistrates to realise their duties in checking of the prices and masses could feel relief fromtheir affective efforts. He wanted that lethargic attitude and carelessness of the duty officerswould not be tolerated and their performance would be monitored through the intelligenceagencies. DCO directed that the electronic price boards in Urdu language should immediatelybe installed on the important city intersections to keep the public aware of prices of dailyused items. He directed to organise green channel system to provide the fruits and vegetablesto the consumers on cheaper rates by eliminating the middlemen. The DCO urged upon



holding of Itwar and Jumma Bazars in the district in organised manner for the relief ofconsumers. He directed that daily performance report regarding the price checking should becommunicated to him. Expressing his grave concern over the complaints of adulteration inedibles, he warned the Food Inspectors to mend their ways and to gear up their efforts foreradicating the menace of adulteration in the society. He directed the District Food Controllerto get the prices of Flour printed on the bags in bold digits and quality of flour be checkedregularly. He announced of holding weekly price control meeting in order to check theperformance of the Price Control Magistrates and Market Committee.

Later, DCO Noorul Amin Mengal inspected the ongoing project of canal road widening anddirected the FDA officers to clear the all obstacles and irritants to complete this projectwithout further delay. He also took a round of the city and observed the green beltsbeautification. He also held meeting with the MD PHA and directed him to develop the greenbelts in the city under a beautiful theme for which services of the students of horticulturedepartment of University of Agriculture be taken for arranging green belts with scientificmanner to enhance the beauty of the city.




Fuel and Energy: Pakistan

LPG price touches Rs 160 per kg markNovember 11, 2013

ABDUL RASHEED AZAD

Liquefied Petroleum Gas (LPG) price has touched Rs 160 per kg with the advent of winter,while LPG marketing companies are supplying the commodity at Rs 120 per kg to retailers,Business Recorder has observed. The LPG is mainly used as an alternative fuel for cookingand heating in the rural areas as well as in urban areas following serious natural gas shortage.Moreover, it also used in the Rickshaws as a replacement of petrol and CNG. Thegovernment is also trying to promote the use of LPG in the vehicles as a replacement ofCNG.

Bilal Jebar, spokesman to LPG marketing companies said that in winter commodity demandwould increase to 2,000 per day from the current demand of 1,600 per day.

He said that marketing companies were trying to meet the increasing demand of thecommodity through timely import. He said that retailers were earning high profit byovercharging the masses as they are selling the commodity at Rs 160 per kg against Rs 130 toRs 140 per kg.

Pakistan''s LPG demand at present stands at 1,600 ton per day, of which 1,300 tons is locallyproduced while the rest is being met through import.

According to market sources, LPG and other fuel prices are linked with Saudi Aramco pricesin Pakistan. The Saudi Aramco contract price of the commodity with the start of Novemberhas touched $900 per ton from $840 per ton, while local producers have not matched thelocal prices with the Saudi Aramco prices and retained at $840 per ton on the instruction ofthe federal government. Local production stands at 1,300 tons per day, while local LPGmarketing companies are purchasing the commodity from producers at Rs 104,000 per tonincluding all taxes, LPG marketing companies are supplying the commodity to retailers at Rs120,000 per ton while retailers are selling at around Rs 160,000 per ton. This shows that LPGretailers are earning Rs 40 on per kg, while marketing companies are charging Rs 16 per kgincluding transposition and other expenditure.

Mian Mohammad Khalid, a commodity dealer in Islamabad, commenting on the increasingprices of LPG said that in coming days it would further increase due to intensifying winterand high demand. He said that at present LPG in hilly areas including Murree, Muzafarabad,Gilgit-Baltsitan, Mansehra, Fata and Balakot is being sold at Rs 160-170 per kg against Rs155 per kg and Rs 1600 per domestic cylinder of 11.8 kg against Rs 1450.

Similarly, the notified LPG price for the plains including Karachi, Lahore, Faisalabad,Sargodha, Rawalpindi, Islamabad, Gujranwala, Gujrat, Rahimyar Khan, Multan, Attock DeraIsmail Khan and Peshawar are hovering at Rs 130 per kg against Rs120 per kg.

But contrary to the announcements of the LPG marketing companies and Distributors,Business Recorder has observed that the commodity is being sold at Rs 160 per kg in twin



cities of Rawalpindi/Islamabad.

Similarly, LPG in other cities like Attock, Peshawar, Dera Ismail Khan, Kohat, Sukkur,Rahimyar Khan and Sadiqabad is available to the consumers at Rs 150-165 per kg.

The retail price of LPG in Gujranwala, Jhang, Sargodha, Sahiwal, Multan, and Gujrat isRs155 per kg.


RSPN constructing biogas plantNovember 11, 2013

KHALID ABBAS SAIF

Rural Support Programmes Network (RSPN) is constructing a biogas plant at Green Town,Millat Road, to run 5KV to 10KV power generators on experimental basis. According toRSPN sources, the project would be completed with the financial assistance of theNetherlands Development Organisation and Win Rock International.

Pakistan's biogas programme aims to develop domestic biogas sector as a whole. Sectordevelopment implies the close co-operation and co-ordination of all relevant stakeholders(government, non-government and private sector) at all levels (micro and macro) wherebythose stakeholders are equipped to fulfil the necessary functions. The function chart indicatesthe main functions in a large-scale domestic biogas programme and its relations.

The proposed project is designed to put down a robust foundation for the establishment of acommercially viable domestic biogas sector. The proposal uses a time horizon of four yearsto strengthen the commercial biogas sector.

The project will promote an approach in which government, non-government and privatesector organisations, in a complementary fashion, assume those sector functions thatintrinsically fit the character of each organisation or institution. Through the project, thestakeholders are enmeshed in a supply and demand context in which the supply side ensuresoff-the-shelf availability of the technology while the pluralistic demand side organises thebeneficiaries, provides microfinance, promotes the technology and integrates it into ruraldevelopment activities, sources mentioned.

RSPN sources said that about 3000 plants had been constructed in 12 districts of centralPunjab, which would adhere to all guidelines required for the Clean DevelopmentMechanism (CDM) so that Carbon Credits obtained from the project could be redeemed andutilised for further expansion of the programme.




Iran's hint at revising gas price widelyhailedNovember 11, 2013

MUSHTAQ GHUMMAN

Pakistan is jubilant over Iran's willingness to revise price of gas aimed at materialising thetroubled Iran- Pakistan (IP) gas pipeline project which is being opposed by the United States.This happened after two-week hectic debate on the report 'rethinking Pakistan's energyequation: Iran-Pakistan Gas Pipeline', launched by SDPI, renegotiating gas price factor cameup.

Recent announcement was made by Hamid Raza, Managing Director of Iran's state-ownedgas company, National Iranian Gas Company (NIGC), signatory of Gas Sale PurchaseAgreement (GSPA) with Pakistan, hinting at Iran's willingness to revise gas price.

Sustainable Development Policy Institute (SDPI), industrialists, CNG sector, and commonpeople of Pakistan hail the decision. Yet, all the credit goes to Iran as this step will helpPakistan to finally materialise the project. "The objective of SDPI was to convince Iran torevise the gas price" said Arshad Abbasi head of SDPI.

He said the report, which was technically reviewed by imminent experts, presents acomprehensive analysis of Pakistan's energy sector. The focus of the report was on evaluationof the Iran Pakistan gas pipeline agreement and its eventual impact on Pakistan's powersector. The report emphasises the fact that the gas price determining formula, revised andsigned in GSPA (Gas Sales and Purchase Agreement) 2013, will severely burden Pakistan'seconomy.

"If we continue to import gas at the rate of $15.38/MMBtu, while crude oil price is $110 perbarrel, as per the formula, the price will only increase with time as the oil prices increase," headded.

The negotiating team in 2009, in-fact, had changed the crude oil parity of 45 but this saw adramatic increase to 85 percent crude oil parity under the 2009 GSPA with Iran, according tothe report.

Economic Co-ordination Committee (ECC) on April 10 2007, approved gas purchaseformula, indexed with Japan Customs Cleared Crude (JCC), a crude oil price index. In year2007, the average gas production price in Pakistan was $2.6 MMBTU.

Pakistan has been importing electricity from Iran since October 2002 and the main reason forwhich Pakistan signed the agreement was to import Iranian gas for running power generationplants. Considering the high gas prices, importing electricity directly from Iran appears to bea much better option

SDPI is grateful to Iranian government's announcement of revisiting the gas pricing formula.The two countries need efforts like these to strengthen their brotherly ties and to ensureprogress on both sides of the border.



Shale gas revolution has tremendously changed the world's natural gas trade. At the momentthere are a total 6688 Tcf of in-place shale gas reserves discovered in 41 countries of theworld. Effective exploitation of shale gas reserves in the US has totally changed the naturalgas and LNG trade scenario and the Henry Hub (which is associated with US natural gasprices) offers one of the lowest gas prices in the world.

Due to shale gas revolution, the trend of de-linking oil and gas prices has been actively takenup by many countries in the world which are now revising their long term contracts to availnatural gas at lower prices. Pakistan also has 105 Tcf of shale gas reserves which, if utilised,can considerably take out the country from the present endemic energy crisis.

Now realising the global trend, when the Russian giant Gazporm offered 15 percent discountto Italy, Germany and other Baltic States Estonia, Latvia and Lithuania. While RWE, theGerman electric utilities company annually importing 285 billion cubic feet gas, had sued theGazporm at the International Court of Arbitration of the International Chamber of Commercein Paris. The court penalised Gazporm with $500 million.

The step of Iran to renegotiate price will open avenues for China and India as well to importgas from Iran though pipeline via Pakistan to phase-out coal-fired electricity generation.


Chief minister Punjab reviews progress onenergy projectsNovember 11, 2013

Punjab Chief Minister Shahbaz Sharif presided over a meeting to review the progress onvarious energy projects in the province. Provincial Minister for Energy Sher Ali Khan,Member Provincial Assembly Ayesha Ghaus, Additional Chief Secretary Energy, SecretaryFinance, Chief Executive Officer Quaid-e-Azam Solar Park Najam Shah and other concernedofficers were present in the meeting.


Sindh CNG stations to remain closed todayNovember 11, 2013

According to gas load management plan all the CNG stations in Sindh will remain closedfrom 8 am on Monday, November 11 to 8 am on Tuesday, November 12 for 24 hours. Thiswas announced by a spokesman of the Sui Southern Gas Company (SSGC) here on Sunday.He said that the second shutdown for the coming week will be observed from 8 am onSaturday, November 16, to 8 am on Sunday, November 17, for 24 hours.




Why has government increased powersector subsidyNovember 10, 2013

ZAHEER ABBASI

The government has increased power sector subsidy to Rs 250 billion from the budgetedamount of Rs 220 billion for the current fiscal year due to failure in implementing reformslike tariff rationalisation from October, 1 2013, it was learnt.

According to budget documents, the government budgeted Rs 220 billion as power sectorsubsidy for the current fiscal year, which included: (i) Rs 150 billion to Pepco on account ofinter-disco tariff differential, (ii) Rs 3 billion tariff differential for agri tube wells inBalochistan, (iii) Rs 12 billion for payment of electricity receivables from Fata, (iv) Rs 100million on account of exchange rate differential for USAID grants to generation companiesand (v) Rs 55 billion subsidy to KESC.

Finance Minister Ishaq Dar addressed a press conference along with International MonetaryFund (IMF) mission chief Jeffrey Franks the other day. At the press conference, Dar saidpower sector subsidy would be Rs 250 billion for the current fiscal year. Sources on conditionof anonymity, however, said the government was unable to implement the agreed power tariffincrease from October 1, 2013 and a failure would now cost it an additional subsidy of Rs 25-30 billion.

They further stated that an amount of Rs 250 billion for the power sector is contingent torationalisation of tariff reduction of transmission and distribution losses, better fuel mix andimprovement in receivables of Discos, otherwise the subsidy for the current fiscal year maybe considerably high. An official disclosed that the power sector subsidy had already surgedto Rs 175 billion during the last four months.

Last year, the government budgeted Rs 134 billion as subsidy to Pakistan Electric PowerCompany (Pepco) and Rs 50 billion for Karachi Electric Supply Company (KESC), whichwas subsequently revised upward to Rs 264.9 billion for Pepco and Rs 84.317 billion for theKESC due to governments failure to implement required reforms in the power sector.According to Finance Ministry''s documents, the government provided Rs 1.581 trillionsubsidy to the power sector on account of tariff differential since 2007-08 with Rs 133.360billion in 2007-08, Rs 109.170 billion in 2008-09, Rs 178.840 billion in 2009-10, Rs 346.100billion in 2010-11 and Rs 464.020 billion 2012-13.




Gas, power shortages: big relief throughLNG import by next year, says AbidNovember 10, 2013

Abid Sher Ali, State Minister for Water & Power, here on Saturday said the governmentwould overcome natural gas crisis to next year with the LNG import. He was talking toreporters at WAPDA House. In response to a question about the timeframe regardingreducing tariff of power, the Minister made no comments.

"We are producing a share of power with diesel, costing Rs 24 per unit", and the difference inthis regards is being paid by the government. This trend will reverse only when we startimporting LNG next year," he claimed enthusiastically. He said bullish trend in furnace oilprices in the international market from Rs 83,000 per ton to Rs 89,000 in just few days hadadded to power generation burden.

There are 90 feeders in the area of Peshawar Electric Supply Company (PESCO) having over90 per cent losses. Some of these losses were as high as 99.99 per cent, he claimed. He addedthat there were 60 feeders in PESCO consumed Rs 6 billion worth of power in a month evenif there was only a 6-hour supply of power a day. He said a member of provincial assemblyfrom the area created hurdles in a campaign against power theft. The federal governmentasked Chief Minister Khyber Pakhtunkhwa, IG KPK and police the station concerned to filean FIR against the MPA in this connection.

Similarly, he alleged, power losses in the area of ex-Speaker of KPK assembly were as highas 99.9 percent. He said that Prime Minister Nawaz Sharif had given strict direction aboutminimising power losses and increasing recoveries. He had asked us to conduct surprise visitsand take actions against erring officials. He himself was monitoring the situation. He himselfvisit all power distribution companies and other institutions concerned, minister said.

He admitted that there are certain areas in Lahore such as Defence and Allama Iqbal Colonywhere losses were as high as 80 percent. Abid Sher said a law would be presented in the nextcabinet meeting for making power theft a non-bailable offence. Distribution Companies(DISCOs) directed to undertake an audit of losses in their respective areas in order to have aclear picture in this regard. He said slabs of losses of each area in DISCOs had been preparedto ascertain possible extent of loadshedding, saying outages would be carried out more inhigh losses areas.

The government had resolved circular debt that helped reduce outages by 6-8 hours daily. Hesaid 120mw Dubair Khawar Hydropower project and 22mw Satpara Dam would becompleted next month. He added the financial close of 1,250mw Jamshoro Thermal wasexpected within a few months. About new coal-fired thermal plants in Gadani, he said Qatariand Russian investors had expressed their keenness to invest in projects. He was upbeat abouttangible progress on these projects in the next 3-4 months, including award of contracts.About setting up of another plant at Guddu having capacity of 250mw, he said, significantprogress had been made to operationalise first unit.

In response to a question about present shortfall of electricity, he claimed that deficit insupply and demand of electricity had been reduced to 1,200 to 1,300mw. As hydel power was



going down rapidly due to seasonal dip in water availability, reliance on thermal power wasincreasing day by day. We are only 2,000mw of hydel power was being produced againstpeak generation of about 7,000 mw.

Sher Ali said progress on conversion of thermal plants to coal was also being made, besidesimport of LNG by August-September 2014 for meeting the requirements of gas-fired, dieseland furnace oil-run thermal plants. He said a plant to outsource various feeders of DISCOswas being prepared to make power system more efficient. When asked, he categorically ruledout the existence of any deal over the release of Musharraf. "It is a decision of courts, wehave great reverence and regard for the decision of the honourable courts," according to him.




BR Research: All

With Millat, lies a lesson for auto industryNovember 11, 2013

BR Research

When Millat Tractors (MTL) recorded highest-ever annual sales volumes in FY11, it alsomanaged to avoid one thing local auto sector is well known for complacency. The same year,Millat began to lobby AGCO, owner of Messey Ferguson brand, to remove the exportrestriction from tractors and components manufactured by the Company. After a year ofintense efforts, the management’s efforts bore fruit and MTL was granted export license inJuly 2012.

In order to get the restriction removed, a key challenge faced by MIllat involved meetinginternational quality standards associated with the Massey Ferguson brand. According toCompany sources, representatives of the American farm instrument maker visited plantsfacilities multiple times to assess quality control and assurance, before the agreement wasfinally reached.

MTL’s Chairman Sikandar Khan is reported to have said its tractors are cheaper than tractorsof similar design and quality manufactured in India or China. Competitive pricing has been akey factor in Millat’s success in achieving export contracts for Messey Ferguson, which is aninternationally recognized brand. And according to industry experts, its export potential toMiddle Eastern and African (MENA) markets currently stands at fifty thousand units perannum.

Under the agreement, MTL was required to commence production by July 2013. Thisincludes production of tractor components and assembly of semi-knocked down units in therange of fifty to eight-five horsepower range for export to AGCO customers in China andAfghanistan, as well as the MENA markets.

But Millat tractor’s global plans don’t just stop here: the Company also formed TIPEGIntertrade, registered at JLT free zone of Dubai. According to the Company, “the foreignbuyers are reluctant to travel to Pakistan due to law-and-order situation. The Company feelsthe need to have an offshore base where buyers can travel freely, have business discussionsand place orders.”

The subsidiary is intended to be used as a trading hub to market engineering goodsmanufactured not just by MTL, but by other group companies such as Bolan Castings, MillatEquipment and Industrial Products.

In itself, a business entity striving to maximize profits by exploiting the export potential of itsproducts sounds plain economics. But the lack of such precedent in local auto industrysuggests that MTL achievement is no small feat.

Local car assemblers have long complained that opening up of markets to used car import isno short of an existential crisis for the domestic industry. It is argued that given the bleakdemand prospects and lack of scales, domestic industry must be protected against influx of



foreign cars. However, the MTL’s success story has proved otherwise.

Millat’s venturing in the export market proves that even in the absence of domestic demand,any local industry can stand on its feet by manufacturing quality products that meetinternational standards. All it really takes is a will!

Tomatoes on fireNovember 11, 2013

BR Research

You say ‘tomayto’, I say ‘tomAto’, but we both pretty much could not afford it in the lastseven to ten days, and probably won’t be able to do so for quite some time.

The reasons why tomato prices have caught fire depends upon who do you really want tobelieve, because there are two versions making rounds.

The first version revolves around the natural demand-supply phenomenon. Waheed Ahmedof All Pakistan Fruit and Vegetable Association says the reason why prices shot up wasbecause the extended heat wave had negatively affected the crop cycle.

Haji Shahjehan, Chairman Falahi Anjuman Wholesale Vegetable Market at Karachi, concursand adds that tomato prices also shot up because its prices in India-–one of Pakistan’s maintomato import source-–rose substantially due to Diwali season.

Shahjehan also affirms the notion that tomato prices usually rise near Muharram, as the holymonth is marked by religious gatherings. Sources also say that there was a delay in harvest asmany tomato harvesters are of Hindu religion, some of whom are on holidays to celebrateDiwali.

Both Shahjehan and Waheed contend that tomato supply from Sindh is likely to be availablefrom November 15, which means that prices will gradually start tapering off after that date.But, before you heave a sigh of relief, the second version-–one that revolves around‘artificial’ demand-supply gap —ought to be heard.

Ibrahim Mughal Chairman Pakistan Agri Forum disputes the view that prices will taper offany time before February 2014, when supply from Punjab hits the market. He agrees thatsupply from Sindh will begin from the middle of this month, but maintains that prices willremain north as hoarders will continue to create an artificial supply shortage.

Ibrahim says middlemen have bought tomatoes in the range of Rs12-Rs20 per kilogram fromfarmers, and have hoarded the commodity (in cold storage) in anticipation of the heatproblem.

In such a scenario, one would have thought that the government would take some measuresand clarify the matter. But, till the time of writing this piece, the government was missing inaction; although the administration in Karachi had reportedly ordered the tomatoes to be soldat Rs66 per kilogram when, in fact, prices had shot up to Rs160-Rs200 per kilogram.

Shahjehan of Karachi Sabzimandi disagrees with the view that tomatoes have been hoarded.



But, since the technology to cold store unripe tomatoes for up to four weeks (and ripetomatoes for one week) does exist, it wouldn’t be too much to ask from the government torun an inventory check at suspected warehouses. Besides, the government’s job should begovernance and planning instead of price fixing.

As for consumers, they will find out which version is true, come mid-November.

Talk more, get insured!November 11, 2013

BR Research

Does getting insured feature on the to-do list of Pakistanis? Even the most ambitiousestimates put life insurance coverage to less than 10 percent of the population. One wouldthink that the security situation in the country will force at least the breadwinners in a familyto get life insurance. Whether they feel that need or not, the insurance companies and now thetelecom firms are really hoping they would.

The latest telco insurance product comes from Telenor Pakistan, which has just launched afree life insurance: “Talkshawk Mohafiz Zindagi Beema”. Based on account-usage of at leastRs200 a month, the Norwegian telco’s prepaid users can subscribe for this insurance productwhose benefits, in the case of death from any cause, accidental or natural, range fromRs20,000 to Rs100,000.

There is no documentation or age limit or medical examination required for this insurance,and there are no premiums to be paid. The individual should be a duly registered Talkshawkprepaid user. The product’s underwriters are Jubilee Life Insurance and MicroEnsure, aTelenor subsidiary.

The maximum insurance benefit (Rs100,000), which is against a monthly balance usage ofRs900 or more, seems a bit low. With the cellular industry’s average revenue per userhovering little above Rs200 a month, one would think that a lot of customers may not findthis insurance attractive enough.

But hey, this product is totally free, so no complaints there. Those among Telenor’s 32million plus subscribers who meet the usage threshold will probably see no harm in gettingregistered. Clearly, this product seems to be part of some strategy to increase airtime usageon the Telenor network. But its traction depends on whether the insurance benefits aredeemed motivating enough for subscribers to sign up.

Mobile insurance seems to be gaining traction in Pakistan. Zong was the first telco to offer apremium-based life insurance back in June 2011. More recently, branchless bankingproviders Easypaisa and Mobicash announced their respective savings-cum-insuranceproducts, which offered users to avail free life and accidental death insurance on maintainingaverage minimum monthly balance of Rs2,000 or more.

The life insurance market’s potential is huge and untapped. Insurance companies seem to begearing up for that, as their recent TV ads indicate. Once hesitant, commercial banks alsoseem more serious about Bancassurance prospects. The microfinance industry has also grownits micro-insurance clients to over 3.1 million as of June, 56 percent of which were life



insurance policyholders. In this context, mobile insurance is also out there to get its share ofthe pie.

========================================TALKSHAWK MOHAFIZ========================================Mobile balance Free lifeusage in insurance covera month for next month========================================Rs 200 to 299 Rs.20,000Rs 300 to 499 Rs.30,000Rs 500 to 699 Rs.50,000Rs 700 to 899 Rs.70,000Rs 900 and above Rs.100,000----------------------------------------Source: Telenor Pakistan.========================================

Global oil-–bears outclass bullsNovember 11, 2013

BR Research

International crude oil prices now stand at a 5-month low and there is enough consensus inthe market that it is slated to go down further. WTI crude oil was seeing trading at $94 abarrel on Friday as Iran was nearing another round of talks with P5+1 countries over itssanctions and nuclear programme.

If negotiations are successful and sanctions lifted, it will free up another 1 million barrels aday of Iranian oil to enter the market. Crude oil prices are widely perceived to carry asignificant premium to what is generally refereed as ‘Iranian risk premium’ to the tune of$10-15 a barrel. While it is too early to take a call on the outcome of the negotiations, globaloil analysts believe that just the process of negotiations should be enough reason for the riskpremium to halve.

On top of that, global oversupply and 5-month high oil inventory are sufficient to keep thepressure on global crude oil. “Fundamentally, the oil market is weak to begin with. We’reawash in oil not only in this country but also around the world, so I’m looking to short itanyway, adding Iranian oil to the market only makes crude oil weaker,” GRZ Energy’sAnthony Grisanti, an oil futures trader on the floor of the New York Mercantile Exchange,was reported to have said.

Although the US economic picture is slowly and gradually improving, the market expectsoversupply to rule prices and not the strong US recovery. According to a latest survey byBloomberg, nearly two-third respondents predict oil prices to stay south in the near futureowing to oversupply fears and significant inventory pile.

US crude production reached its highest rate since 1989 last month. Pundits also expect theFederal Reserve to scale back stimulus, which runs the risk of reducing demand for



commodities-–hence further pressure on oil prices. OPEC, on the other hand, believes that themarket will not remain oversupplied and oil should continue to trade above $100 a barrel.Time will tell if the Iranian risk premium erodes as swiftly as some expect it to—as itremains the single largest determinant of price direction.



Brief Recordings

'Pakistan may be the largest mobileapplication developer in the world,'Chairman, P@SHANovember 11, 2013

Information technology has been widely touted as a prominent up-and-coming sector in thecountry. Beyond the few sizeable enterprises that pioneered in the IT sector over the pastdecade and a half, there is a new emerging force that is propelling the growth of IT in thecountry, according to Naseer Akhtar, the President of Infotech Group and current Chairmanof P@SHA. In a recent interview with BR Research, he contended that "Pakistani youngsterscommand a significant share in the global mobile application market to the point thatPakistan may be the largest mobile application developer in the world."

The industry veteran informed that the major focus of IT firms in the country is ondevelopment: web and applications. However, he pointed out that margins in these areas arethinning as "coding is becoming cheaper world-wide". He highlighted research, analytics anddesign as "emergent opportunities" but added that these areas require specialised expertisethat must be inculcated through the induction of PhD holders and expert practitioners.

While commending the efforts made by the likes of P@SHA and Plan9, he said thatemerging tech entrepreneurs are blazing their own paths and cementing their globalcompetitiveness; but, that at present, these start-ups are not graduating into enterprise-levelbusinesses. Though Akhtar admits that the prevalent legal framework may not be especiallyconducive towards mergers and acquisitions, still he contends that the major limiting factor isthe prevalent mindset in the country.

"I have personally attempted to acquire more than three dozen companies over the years. Insome cases, their owners went on to shutdown their businesses instead of selling them tosomeone else that could have revived them." He highlighted that this trend is not limited tothe IT sector or even the services sector as a whole; "in the past two decades there are few ifany mentionable examples of firms that have grown as a result of M&As".

Infotech Group itself has grown organically over a period of 23 years. It began as a smallcompany back in 1987. At that time, it provided hardware and software products and alsonetwork solutions. Since that time, the Company has emerged as a prominent IT firm in thecountry and is primarily focused on system integration.

"If there is a bank that needs computing infrastructure, it would need hardware and softwareinstalled throughout its network; then it would require some specialised software for differentpurposes that can also be compatible with each other; so, that is the kind of work we do",stated Akhtar while explaining the business of his Company.

Infotech primarily caters to the financial industry including banks, stock exchanges andfunds. The Company has also developed its own trading engine which it is selling world-



wide. Public sector is another focus area for the Company. "Our e-governance solutionsinclude government-to-citizen and government-to-business services like online drivinglicense renewals, birth registrations and issuance of business licenses."

The Company maintains presence in Europe, Africa and the Middle East. It has alsoestablished a Company office in Singapore. The Company's president explained that theSingaporean authorities are very eager to help businesses that establish themselves there.

Given this background information about the efforts of the Singaporean authorities to attractbusinesses and investments, the conversation naturally shifted to government support here inPakistan. Unfortunately, there is little support to speak of; Naseer Akhtar revealed that "thePakistan Software Export Board is completely dormant and no meeting of its members hasbeen convened in well over two years; the impetus that was generated by Dr Ata-ur-Rahmanis now long gone."

He also informed that the industry's sole interaction with the current State Minister ofInformation Technology, Mrs. Anusha Rahman took place when she graced the P@SHAAwards with her presence; albeit briefly. The Prime Minister has kept the portfolio of FederalIT Minister to himself, but has not met with industry representatives since assuming charge.

Pakistan has been sliding down each year on the Network Readiness Index, published by theWorld Economic Forum. "This has been a recurring occurrence in recent years, while acrossthe border in India; city after city is emerging as an IT hub.

"At present, India is home to six of the top ten cities on that list, while two are in thePhilippines," he highlighted. Why is the country stagnating on this front while othercompanies with comparable demographics and incomes per capita prosper? Akhtar believesthat there is a lack of leadership that can grasp the emergent opportunity and galvanizestakeholders to take on the challenges.

The new government appears to have ignored the domestic IT sector, much like itspredecessors. But the industry stalwart lamented that the industry stakeholders have also nothelped their own cause. "There is no effort to market our industry or the country; not fromindustry stakeholders or from the government," he said explaining that while some large ITcompanies often pitch to existing and potential clients abroad, there are no collective effortsto attract business to the country.

Compared to IT firms across the country's eastern border, Pakistani firms are typicallyengaged in services that provide higher potential yields. Akhtar explained that Indian firmsdominate in BPO segments that generally yield lower per capita returns than segments likesoftware development, research and engineering. However, the size of the domestic industryis quite small in comparison to India and also in the context of global trade of IT services.

Even though IT firms in the country have posted impressive growth in recent years, NaseerAkhtar believes that the growth trajectory so far has not moved in line with true potential."There is a lot of good work being done but we must step up the scale significantly. As anation, we must focus on getting ourselves back into the mainstream globally. There aremultiple fronts to work very hard on as an industry, as government and as a nation."




Miscellaneous News

Waiting for rescue: Pakistan Steel Millsneeds huge money injection to stay afloatBy Farhan Zaheer / Creative: Munira Abbas

Published: November 10, 2013

KARACHI:

Pakistan Steel Mills (PSM), the biggest and only integrated steel mill in Pakistan, isgoing through its worst financial and production crisis in its history of three decades.

The mill has not only accumulated huge losses, especially in the last five years, it is alsorunning at an embarrassingly low production capacity of just 3% – the lowest capacityutilisation in 31 years.

PSM, which is also the largest industrial complex in the country, has a huge workforce ofover 16,000 employees – one of the core reasons why it is called a white elephant. But forsome experts overstaffing – many of the employees have been appointed on political grounds– is not the biggest problem, it is something else.

At present, the biggest concern for the national giant is immediate injection of a huge amountof money, with some experts putting it at Rs20 billion, to purchase raw material to be able tostand on its feet again. However, the government, struggling to improve affairs at a numberof loss-making enterprises, is finding it hard to pump money and is only releasing it inphases, with no significant improvement in the situation.

In September this year, the PML-N government decided to bail PSM out with a Rs2.9 billionpackage. Though most of the money has been provided, it has only gone to meet salaryexpenses of employees and to purchase some basic raw material.

This bailout package is too small compared to the four packages that the previousgovernment approved in its tenure. The last administration injected over Rs40 billion in fourphases, but since the money was provided in phases, it did not bring any positive change inthe financial health of PSM.

“Pakistan Steel Mills is still manageable. Those who are saying that it is a hopeless case donot know much about the industrial complex,” said Haq Nawaz Akhtar, former PSMchairman.

“The mill should run at all cost, whether the government runs it under a private managementor it is carefully privatised at certain terms,” said Akhtar, one of the longest serving PSM



chairmen, who remained at the helm of affairs from 1981-1986. Before becoming chairman,Akhtar served PSM as a finance director from 1974-78.

Installed capacity of the mill is 1.1 million tons and it is capable of expanding production tothree million tons. Because of poor planning, mismanagement and corruption, successivegovernments have never been able to run the mill even at its installed capacity.

Background interviews with people who had run PSM in its golden years suggest that vestedinterests have always thrived at the expense of this national asset. They blame successivemanagements of the mill for being incompetent.

“I think corruption is one of the few sins in which some heads of PSM were involved. Someof these have faced trials in the past,” said one of the top officials of PSM, but asked not to benamed.

“What is more dangerous is criminal negligence and mismanagement and this is whatdrowned this important industrial complex,” he said.

Running at just 3% capacity, the mill is booking losses of at least Rs2 billion per month. “Itcan reach break-even at 70-75% capacity and to make profit, it needs to run at 80-85%, whichlooks impossible unless it buys raw material in big quantities,” the official said.

“One of the biggest reasons why PSM has gradually weakened is that the organisation faces adearth of people who could replace the top management once they retire,” PSM’s formerdirector Irshad Ali Rizvi told The Express Tribune. He retired in 2007.

The way forward

Akhtar believes that the government should put in place a private management, preferablycomprising professionals who have prior experience to save the steel mill. This managementwill have to undertake three tasks – revival of the mill, expansion in production capacity andsupport the downstream steel industry operating close to the PSM premises.

Published in The Express Tribune, November 11th, 2013.

A look back at history of PSMBy Our Correspondent / Creative: Munira Abbas / Farhan Zaheer


KARACHI: For many people, Pakistan Steel Mills (PSM) is a financial black hole, butfor others the industrial complex has repaid most of what the government has investedand can still do wonders because of its size and importance.

Those who served PSM in its initial years say that despite repeated setbacks and continuousdelays, the construction of the mill is a big achievement.

“Top bureaucrats and engineers of that time used to say that this project will nevermaterialise – let alone in the scheduled time frame – mainly because of numerous financial



constraints and bureaucratic hurdles,” former PSM chairman Haq Nawaz Akhtar said, whoheaded the mill from 1981-1986.

People who think PSM is a national asset and it should be revived at all costs say the mill hascontributed Rs103 billion to date in duties and taxes. At the same time, it cannot be ignoredthat accumulated losses of the mill are also in billions that can only be recovered once itreturns to profit.

With a workforce of 16,000, experts say PSM is overstaffed by at least three times. Forinstance, its per person production capacity is just 50 tons of steel per year, which is very lowaccording to private steel mill standards in the country.

A private steel mill produces 350 to 450 tons per person per year while South Korean andJapanese mills produce 1,300-1,500 tons per person per year, chief executive of a privatesteel mill told The Express Tribune.

Over the years, successive governments have appointed their favourite people on top postswho took hefty salaries up to Rs1 million a month. On the other hand, regular employees,who rose to top management positions, got a maximum of Rs150,000 a month.

Industry officials believe that the government should run the mill under a privatemanagement first and sell its shares later when it returns to profit. According to them, at thisstage the mill will not fetch a right value. Moreover, any investor who buys a stake should bebound to run the plant, otherwise, he will sell it and use its highly valuable land.

Short history

The idea of a steel mill was floated in the first five-year plan of 1955-60, but owing tofinancial constraints, Pakistan was not able to implement it until 1969. That year, Pakistansigned an agreement with former Soviet Union for a feasibility report on the steel mill.

Former prime minister Zulfikar Ali Bhutto laid the foundation stone of Pakistan Steel Millson December 30, 1973.

Construction work started in 1974 by a consortium of Pakistani companies under thesupervision of Soviet engineers and experts. According to former PSM employees, more than400 Russians were involved in the project.

The industrial complex was built with a huge investment of around Rs25 billion (or $2 billionaccording to the rupee-dollar parity at the time).

It first produced coke from coke oven batteries in 1981. Later, billets, hot-rolled and cold-rolled products were produced one after another. The mill started commercial operations onDecember 25, 1984.



The Soviet Union established 35 steel mills in different countries and 1.1 million tons was thestandard capacity of those mills. PSM was one of them. But, according to industry officials,Pakistan was one of the few countries that failed to expand their steel mill. The mills set upwith Soviet assistance in Iran and other countries are now running at an annual capacity ofabout three million tons.


Pakistan Steel privatisation looks evenmore difficult than last attemptBy Saad Hasan / Creative: Munira Abbas


KARACHI:

When the Supreme Court of Pakistan objected to its privatisation in 2006, PakistanSteel Mills (PSM) had over Rs9 billion lying in bank accounts. It had closed previousfiscal year with a profit of Rs6.7 billion. It was churning out 979,000 tons of steelproducts and had raw material sufficient for several months.

Today, the plant is literally shut. With long-term debt of over Rs40 billion, it is caught up in avortex where it borrows money every year to pay off past debt. Whatever little is left goestowards meeting cost of running coke oven batteries, furnaces and paying salaries, leavingnothing for coal and iron ore.

It still has 18,000 people on its payroll, many of whom have been hired to please politicians.The financial burden of settling debt and injecting equity without cutting cost is somethingthat Pakistan Muslim League-Nawaz’s government doesn’t seem interested in doing,especially under the IMF’s watchful eye.

Among the loss-making state-run enterprises, the government is pushing for privatisation ofPakistan International Airlines (PIA). But the fact that no substantial effort has been made tofix matters at PSM reflects some intentions of the policymakers.

“It is as important for this government to privatise Pakistan Steel Mills as it was for us,” saysAwais Ahmed Khan Leghari, who was heading the privatisation ministry when the PSM dealwas struck down. “Government should sell it even if investors offer a price below than whatwe received.”

PSM has had a poor financial history. Since it started full-fledged production in the mid-1980s, it remained in losses for most of the years. News reports in 1991 were as bleak aboutthe country’s largest industrial concern as they appear today.



From 1969 when work started on the mills under the guidance of then chairman Syed SaeedJafferi until 2013 when CEO Major General (Retd) Muhammad Javaid is running the show, ithas seen 26 managements taking up the reins. Except for three, none of them could exploitthe dominant position of the PSM in the market.

All these years until 2000, PSM’s production cost would always be more than revenuedespite the fact Pakistan imports most of its steel requirement.

No wonder that it was as far back as May 29, 1997 that the Council of Common Interestsgave the go-ahead for privatisation. However, the plan was shelved by the time General(Retd) Pervez Musharraf came to power.

From 2000 to 2008, PSM rode on best years of its history as it continuously posted profits.But before that, the government had to clear up some of the mess.

“By 2000, PSM was carrying Rs19 billion in debt. Of this, around Rs12 billion was theprincipal amount, which the government settled to kick-start transformation,” recallsLieutenant General (Retd) Abdul Qayyum, who was PSM chairman in 2004-06. “Payment ofrest of the debt was deferred until 2013.”

Towards this end, the contribution of Lieutenant Colonel (Retd) Afzal Khan, whospearheaded the transformation from 1999 to 2003, must be appreciated. It was during histenure that PSM was put in order.

One of the most important contributors to the restructuring was the presence of uniformedofficers at the helm of affairs that kept unions under control.

“We had unions but there was no CBA because of a court order. More importantly, there wasno outside interference in organisational affairs like we later saw from 2008 onwards,” saysQayyum. “By the time I quit in 2006, all the debt was settled and we had plenty of cash andspare parts.”

Then what went wrong? How can a company which had always enjoyed a monopoly plungein crisis? How can its steel be sold below cost when the market has a good appetite for theproduct? How can imported steel, which is shipped hundreds of kilometres on oil-run ships,compete with local supply?

“Mismanagement, corruption, overstaffing and extremely poor marketing…this is whathappened to PSM,” says Qayyum. “When the management is not capable, then it can’texploit the organisational potential.”

Industry officials are almost unanimous that it was sheer misjudgement and corruption whichlanded PSM in accumulated losses of over Rs90 billion in the past five years.

One oft-repeated story is the impact of global meltdown in 2008. The story goes like this: ascommodity prices crashed, PSM was sitting on massive unsold inventory and expensive rawmaterial. When it should have used strong-arm tactics to sell the steel to traders it didnothing. Consequently, it had to sell the products at a loss from which it never recovered. In



between all of this, steel products were sold to favourites at a loss while costly raw materialwas purchased against kickbacks.

In following months, corruption cases were filed, the apex court took up the matter, FIAgrilled officers, newspapers reported wrong deals and NAB got involved. But nothing cameout of it.

Now as fixing PSM becomes imperative, privatisation has turned out to be a difficult task.

Awais Leghari says in 2006 the government was selling the mills as a going concern. “Weweren’t just selling an asset. We were selling a business. People failed to understand that.”

With current losses and debt, the government would have to make some hard choices, hesaid. “PSM has excess land that could be sold to generate cash.”

Despite repeated attempts, State Minister for Privatisation Khurram Dastgir Khan didn’trespond.


Billets vs ship plates - tax benefits or a levelplaying field?By Kazim Alam / Creative: Munira Abbas


KARACHI: In a typical rent-seeking economy like Pakistan, it is not unusual for vestedinterests to lobby against each other to extract maximum tax benefits from thegovernment at the cost of fair competition. And the steel industry is no exception.

While steel manufacturers insist that the government must revise tax rates for the ship-breaking industry in order to ensure a level playing field for all stakeholders, ship-breakerscontend that they already operate under tight regulatory and tax structures.

Raw material for steel bars is obtained primarily in two forms – ship plates that are suppliedby ship-breakers, and steel billets, which are produced by steel melters.

“The government should impose federal excise duty on ship plates and ship items withimmediate effect at the rate of at least Rs12,000 per ton in order to ensure a level playingfield in the steel industry,” the owner of a private-sector steel mill told The Express Tribunein a recent interview, but requested anonymity.

Currently, the market price of steel billets is Rs81,000-82,000 per ton while ship plates areselling at Rs67,000-68,000 per ton.

Steel melters attribute the gap in the costs of the two products to the incentives that the ship-breaking industry enjoys, a claim that is rejected vehemently by the producers of ship plates.



Steel bars are heavily used in the construction industry. Although the quality of the steelmelters’ product is markedly better than the steel bars produced from ship plates, the factremains that the end price of steel bars is often the single most important factor behind totalsales volumes.

Industry experts say almost 80% of the total market of steel bars consists of the retailsegment. These retail buyers are less concerned with the quality of steel bars, as they buy onaverage only five to six tons of the product for the construction of single and double-storeyhouses.

In contrast, steel bars produced from steel billets are used mostly in high-rises. This hurts thebusiness of steel melters, as their output is costlier by around Rs12,000-Rs15,000 per ton.

As per an agreement signed by the steel industry’s stakeholders in 2000, the price differencebetween the two products should not be more than Rs1,200 per ton. The agreement usedcustoms and other kinds of duties to create equity among different sectors of the steelindustry.

However, steel melters claim that the ship-breaking industry has received tax benefits to thetune of Rs10 billion during the last five years in the form of relaxation in federal excise dutyand withholding tax.

“The matter can be resolved by a policy statement and notification of a committee todetermine duties and taxes so that the difference between ship plates and steel billets does notexceed Rs2,000 to Rs3,000 per ton at any given time,” the steel mill owner said.

Reacting to the demand of the imposition of federal excise duty on ship plates, Pakistan Ship-breakers Association Chairman Dewan Rizwan Farooqui said his industry is already payingapproximately Rs1 billion every month in taxes.

“We are a labour-intensive industry that consumes little water or electricity. While scrapimporters pay income tax at the rate of 1% only, we are subjected to the tax rate of 5%. Howelse are we supposed to contribute to the national kitty?” he said while speaking to TheExpress Tribune.

According to Farooqui, ship-breakers produce a little less than a million tons of steel per yearwhile the output of steel melters is about four million tons per annum.

However, steel melters insist that while the share of ship-breakers used to be 20% back in theday, the price difference has resulted in ship-breakers controlling more than 60% of marketshare in recent years.




Re-rolling mills increase production of steelproductsBy Shahram Haq / Creative: Munira Abbas


LAHORE: Energy shortages have forced medium and large-scale steel re-rolling millsto find alternative ways of producing their products.

Millers are gradually improving production of steel products as installation of coalgasification plants is aiding their operations, at least in Punjab, industry players say.

The steel industry in Pakistan is dominated by small and medium-scale re-rolling mills,engaged in re-rolling, forging and arc furnace melting activities. In Punjab, there are around200 small, medium and large-scale mills, catering to the demand for steel-based products.

The demand, according to the millers, is still low and largely comes from the constructionindustry, which accounts for more than 50% of steel consumption.

A couple of years ago, some big mills started importing coal gasification plants from Chinaand later some imported the technology from India to cope with the energy crisis andenvironmental hazards.

Since these plants are costly, costing around Rs25-30 million, and can be afforded only by afew millers, medium-scale mills are using domestic coal gasification plants, built withChinese technology and cost around Rs4 million. Though the capacity of these plants is low,they cater to the needs of the mills.

“Steel re-rolling mills produce 85% of products from scrap, which we import and the rest isprovided by the ship-breaking industry,” said Asmat Pervaiz, Chief Executive Officer ofAzad Steel Re-rolling Mills, while talking to The Express Tribune.

Since Punjab mills are experiencing energy shortages, which disrupt production, the use ofcoal gasification plants is increasing. According to Pervaiz, around 20% of mills haveinstalled these plants, which run on imported coal and meet the needs of small re-rollingmills.

The cost of producing finished products with these plants is 40% higher compared to gas andelectricity.

“When we needed raw material from PSM mainly due to better quality, the steel mill onlyprovided 0.4 to 0.5 million tons out of total demand for 4 million tons. However, when NABinvolved re-rolling mills while probing corruption in PSM, we decided not to take rawmaterial from PSM. Now, we do not purchase from PSM,” Pervaiz added.



Total installed capacity of steel re-rolling mills is 10 million tons, but for the last few yearsthe demand for steel-based products has been around 4 million tons, meaning 60% of thecapacity remains unutilised.

Still, the millers find it difficult to meet the demand due to energy crisis and slow economicactivities.

The demand for steel-based products is expected to rise since major industries like textile,construction and engineering could receive a boost, especially after the grant of GSP Plusstatus to Pakistan and provision of soft loans to people for constructing their houses.

“We hope for a better future for our industry, but right now things are stagnant,” said MianMuhammad Ashraf, Chairman of Aryan Steel Industries. “The construction industry is theonly hope for us, though it is not enjoying a boom.”

Ordnance factories are another source that purchase finished products from the re-rollingmills. The fate of around 300 steel re-rolling mills depended on future development of thecountry, which in turn highly depended on reforms in the energy sector, Ashraf added.


Energy crisis: LNG import can lead to cutin power tariffBy Our Correspondent


LAHORE:

A reduction in power tariff is linked with the import of liquefied natural gas (LNG),which will probably start next year. Currently, the government is producing a largeshare of power with diesel, costing Rs24 per unit, forcing it to pay the difference andputting an additional cost burden after increase in furnace oil prices from Rs83,000 toRs89,000 per ton in just a few days.

This was stated by Abid Sher Ali, State Minister for Water and Power, while speaking at apress conference at the Wapda House on Saturday.

He said the government will overcome shortage of natural gas to a large extent next year withthe help of imports, power shortfall will be bridged and electricity will be made affordable forthe people.

He said the government was aware of repercussions of the harsh decisions pertaining toenergy production. The government is doing its job with good intentions and the country willovercome the crisis, he said.

Pointing out that circular debt has increased and power losses have swelled due to multiplereasons, he said steps are being taken to address the problems. It will take time as thesituation has worsened over the last many years, he added.



There are 90 feeders in the Peshawar Electric Supply Company’s (Pesco) area of operation,which suffer losses of over 90%, some as high as 99.99%, he claimed.

According to Ali, 60 feeders under Pesco consume Rs6 billion worth of power in a montheven if electricity is supplied for only six hours a day.

He said a law would be presented in the next cabinet meeting to make power theft a non-bailable offence.

“We have asked state-owned power distribution companies to undertake an audit of losses intheir respective areas in order to have a clear picture,” said Ali. “We want to know the exactnature of theft and losses, so we can take action against the menace and avoid penalisinghonest customers.”

After clearing circular debt, the government has been able to reduce outages by six to eighthours a day, he added.

Ali announced that 120-megawatt Dubair Khawar Hydropower project and 22MW SatparaDam would be completed next month and talked about Qatari and Russian interest in coal-fired power plants at Gadani.

He was optimistic about tangible progress on these projects in the next three to four monthsincluding award of contracts.

He claimed that the deficit in supply and demand of electricity has been brought down to1,200-1,300MW.

As hydroelectric power generation is going down rapidly due to seasonal dip in wateravailability, reliance on thermal power is increasing day by day, he pointed out. “Nowadays,we are producing only 2,000MW from hydro sources against peak generation of about7,000MW.”


Hitting back: PTA blocks 0.2m IP addressesin fresh drive against grey trafficBy Our Correspondent


KARACHI:

One month into operation, the newly acquired grey traffic monitoring equipment seemsto have enabled the telecom regulator to cause some serious damage to gatewayexchanges involved in grey traffic – illegal termination of international calls landing inPakistan.



Pakistan Telecommunication Authority (PTA) blocked more than 200,000 Internet Protocol(IP) addresses, 1,382 mobile SIMs and 3,160 phones or devices through their InternationalMobile Equipment Identity (IMEI) numbers in October, PTA said in a statement.

The data for the first month since the installation of the new equipment to curb grey traffic,looks impressive when seen in the context of the regulator’s performance over the last coupleof years. PTA had struggled to curb grey traffic until recently.

Grey traffic accounts for more than 50% of overall monthly international traffic coming toPakistan, causing losses of over Rs3.5 billion or $35 million a year to the national exchequer.

This loss is brought by illegal gateway exchanges that bypass legal gateways to terminate ororiginate international telephone traffic by using voice-over-internet protocol (VoIP)gateways, wireless local loop (WLL) phones and mobile phone SIMs.

The grey traffic monitoring system, which has been operational since early October 2013, hasthe capability to automatically block the IPs, which are not in the PTA’s white list – a list ofIP addresses which are clear and not involved in any suspicious activity.

Installed as per directives of the Grey Traffic Monitoring Committee of PTA, the newequipment has helped the telecom regulator conduct an extensive audit of the IPs on its whitelist.

Now, “white-listing of IPs” is being done after stringent checks, the statement said, and astrict standard operating procedure has been devised in this regard. As a result, the IP whitelist has been rationalised and reduced from 51,000 to 10,360.

In one recent case, grey traffic was detected by PTA and on further analysis it wasestablished that a Long Distance and International (LDI) operator, Wise CommunicationPrivate Limited, was involved in grey traffic, the statement said.

A joint raid was conducted by PTA and the Federal Investigation Agency (FIA) and illegalterminating equipment was confiscated and culprits were apprehended.

Initial estimates suggest that a total of 11 million minutes per month were being illegallybrought into Pakistan by the company, which showed international calls as local minutes,thus evading over $31,000 a day in government taxes.

In two other raids conducted in Karachi, PTA along with FIA confiscated nine gateways, thestatement said.

To intensify their campaign, PTA has also set up a 24-hour complaint centre to receivecomplaints. Through this facility, the statement said, 1,944 complaints were received untilNovember 9. The numbers reported were not only blocked but also analysed for legal action.




OPEN MARKET FOREX RATESUpdated at: 11/11/2013 6:22 AM (PST)

Currency Buying Selling

Australian Dollar 101.25 101.5

Bahrain Dinar 283 283.25

Canadian Dollar 102.3 102.55

China Yuan 17.35 17.6

Danish Krone 19.25 19.5

Euro 144.25 144.5

Hong Kong Dollar 13.6 13.85

Indian Rupee 1.73 1.83

Japanese Yen 1.0701 1.0805

Kuwaiti Dinar 378 378.25

Malaysian Ringgit 33.6 33.85

NewZealand $ 89.25 89.5

Norwegians Krone 17.75 18

Omani Riyal 278 278.25

Qatari Riyal 29.35 29.6

Saudi Riyal 28.5 28.75

Singapore Dollar 85.75 86

Swedish Korona 16.5 16.75

Swiss Franc 117.25 117.5

Thai Bhat 3.3 3.45

U.A.E Dirham 29.15 29.4

UK Pound Sterling 172.25 172.5

US Dollar 107.95 108.2



INTER BANK RATESUpdated at: 11/11/2013 6:22 AM (PST)

CurrencyBank Buying

TT CleanBank Selling

TT & OD

Australian Dollar 101.17 101.36

Canadian Dollar 102.37 102.56

Danish Krone 19.24 19.27

Euro 143.5 143.77

Hong Kong Dollar 13.8 13.83

Japanese Yen 1.0902 1.0923

Saudi Riyal 28.53 28.58

Singapore Dollar 86.01 86.17

Swedish Korona 16.35 16.38

Swiss Franc 116.69 116.91

U.A.E Dirham 29.13 29.19

UK Pound Sterling 172.23 172.55

US Dollar 107 107.2



Bullion Rates (Gold Prices) in PakistanRupee (PKR)As on Mon, Nov 11 2013, 02:43 GMT

Metal SymbolPKR

for 10 GmPKR

for 1 TolaPKR

for 1 Ounce

Gold 24K XAU 44,422 51,758 138,169

Palladium XPD 26,110 30,422 81,212

Platinum XPT 49,846 58,079 155,041

Silver XAG 738 859 2,294

Gold Rates in other Major Currencies

Currency Symbol 10 Gm 1 Tola1

Ounce

AustralianDollar

AUD 441 514 1,371

CanadianDollar

CAD 433 505 1,348

Euro EUR 310 361 963

JapaneseYen

JPY 40,958 47,723 127,395

U.A.EDirham

AED 1,519 1,770 4,725

UKPoundSterling

GBP 258 301 803

USDollar

USD 414 482 1,287

* These rates are taken from International Market so there may be some fluctuation fromLocal Market.

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