News Alertsimranghazi.com/mtba/downloads/News/2012/News_25_Aug_2012_E… · News Updates Email # 197 25-Aug-12 3 Pak Law Publication Office # 05, Ground Floor, Arshad Mansion, Near

News Alerts

Daily Updates

Saturday, August 25, 2012

News Updates Email # 197

25-Aug-12

2 Pak Law Publication Office # 05, Ground Floor, Arshad Mansion, Near Chowk A.G Office, Nabha Road Lahore. Ph. 042-37350473 Cell # 0300-8848226 [email protected]

Table of Contents

Taxation Pakistan ............................................................................................................................ 3

Insurance guarantee made mandatory for US cargoes ....................................................................... 3

Corporate audit: 16 major risk-based parameters identified .............................................................. 3

FBR decides to conduct audit of 20 percent of large taxpaying units .................................................. 5

Annual Audit Plan (2012-13): FBR to select cases for audit for Tax Year 2011..................................... 6

Non-corporate/AOPs cases: FBR spells out 20 key risk-based parameters for audit............................ 8

Business & Economy ..................................................................................................................... 10

Greenpeace raids Russian Arctic oil platform ................................................................................... 10

Weekly inflation increases ............................................................................................................... 11

Fuel and Energy: Pakistan ............................................................................................................ 13

Afghan-Tajik Basin: PPL to participate in six exploration blocks' bidding........................................... 13

Gas Infrastructure Development Cess: SNGPL urged to entertain court orders that suspend raise ... 13

Power shortfall rises to 4,000 megawatts ........................................................................................ 15

Kapco likely to post Rs 6.1 billion profit after tax ............................................................................. 15

Profit after tax of Pakgen Power Limited increases .......................................................................... 16

Fuel and Energy: World ................................................................................................................ 17

Oil drops on reserves release report, storm limits loss ..................................................................... 17

Miscellaneous News ....................................................................................................................... 19

Meeting of minds: Pakistan, US close to signing investment treaty .................................................. 19

IP gas project: Who will finance Pakistan’s side of pipeline? ............................................................ 20

Rupee dips to all-time low against dollar ......................................................................................... 22

‘Donors willing to finance Kalabagh Dam’ ........................................................................................ 23

Pakistan slipping below water scarcity level ..................................................................................... 24

PEN MARKET FOREX RATES ............................................................................................................. 25

INTER BANK RATES .......................................................................................................................... 26

Bullion Rates (Gold Prices) in Pakistan Rupee (PKR) ......................................................................... 27

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25-Aug-12


Taxation Pakistan

Insurance guarantee made mandatory for

US cargoes

August 25, 2012

MUHAMMAD ALI

The government has permitted Federal Board of Revenue (FBR) to make insurance

guarantees mandatory for cargo clearance, Business Recorder learnt on Friday. According to

sources, although Pakistan reopened transportation of US cargos to Afghanistan under a

Memorandum of Understanding (MoU) signed between Pakistan and United States on July

31 this year, the government has not yet taken any step to avert incidents of hijackings and

terrorism.

The insurance guarantee, the sources said, appeared to be aimed at securing customs levy.

The focal person or representative nominated by US Office of Defence Representative-

Pakistan (ODRP) has now been directed to deposit insurance guarantee equivalent to customs

duty for the clearance of US cargoes.

Sources said that they feared that in the absence of tight security measures; contents of these

consignments might be hijacked and used to fuel terrorist activities. According to the sources,

the authorities are currently charging Rs 15,000 per container as processing fee.

They said that the government should charge a higher fee "against the security of US cargo

consignment"s. They said that a higher security fee would provide financial support to the

national economy. They said that the authorities concerned also directed shippers to file

electronic manifests and submit their manual copies for the clearance of US cargoes.

They said that similarly to the past practice, cargo manifests could be filed prior to the arrival

of cargo, but the same would only be processed for clearance after the arrival of the vessel.

They said original cargo manifests would be retained by customs officials for cargo clearance

and duplicates would be handed over to the focal person.

Copyright Business Recorder, 2012

Corporate audit: 16 major risk-based

parameters identified

August 25, 2012




25-Aug-12


The Federal Board of Revenue has identified 16 major risk-based parameters for selection of

corporate cases for audit under Annual Audit Plan (2012-2013). Sources told Business

Recorder here on Friday that the FBR has finalised the National Annual Audit Plan, 2012-13.

The selection of the cases for audit u/s 214(c) of Income Tax Ordinance, 2011, Section 72B

of the Sales Tax Act, 1990 and Section 42B of the Federal Excise Act, 2005 are made by the

Board through random or parametric computer balloting. The said parameters for corporate

and non-corporate cases in respect of Income Tax and Sales Tax were developed few years

back by a special committee appointed for the said purpose.

Now on the demand of the taxpayers, Tax Bar Associations and Chambers of Commerce etc,

the Board intends to revise/improve the same through addition and deletion in the said

parameters. The FBR has asked the tax managers to suggest additional risk parameters or to

make any addition or deletion in the existing parameters, through which taxpayers are

selected for audit and forward to the Board on priority basis, so that it may be utilised in the

forthcoming selection. Thus, the Risk based selection parameters for audit (corporate cases)

may be revised. The FBR has devised the following Risk based selection parameters for audit

(Corporate cases):

1. Imports in Customs differ/ from declared Imports in Sales Tax and/or Income Tax.

2. Output Tax is different from 16% & 21% (as the case may be) of Taxable Supplies.

3. Input Tax is different from 16% & 21% (as the case may be) of Taxable Purchases.

4. Total Output Tax minus Input Tax differs from Net Payment by 5 percent.

5. Output tax/ Input tax Ratio differs with Sector's Output tax/Input tax Ratio by 5 percentile

points.

6. Gross Profit to Sales Ratio (Income Tax) differs with Sector ratio (Cases where gross profit

growth is less by 2 percentile points as compared to Sectoral growth rate).

7. Net profit to Sales (Income Tax) declared ratio differs with sector ratio (Cases where net

profit growth is less by 2 percentile points as compared to Sectoral growth rate).

8. Decline in Sales (Income Tax) is more than 10% as of last year.

9. Decline in Supplies (Sales Tax) is more than 10% as of last year.

10. Claim of overruled amount of refund under STARR related checks is more than 50% of

the claim or Rs 2 million or above - overruling pertaining to following STARR related checks

ie Bill of Entry, Invoices, Returns, Shipping Bills, Supplier Status.

11. Claim of refund of Rs 2 million or above in Income Tax.

12. Persistent decrease in gross profit over last three years.




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13. Persistent decrease in net profit over last three years.

14. Consistent decrease in output tax/input tax ratio over last three years.

15. Decrease in proportion of taxable supplies to total supplies in last three years by 10

percent in each year.

16. Continuously declaring declined income for the last three years.


FBR decides to conduct audit of 20 percent

of large taxpaying units

August 25, 2012

The Federal Board of Revenue (FBR) has decided to conduct audit of 20 percent of the total

large taxpaying units including multinational companies and corporate entities which filed

their income tax and sales tax returns for Tax Year 2011 and falls within the jurisdiction of

Large Taxpayer Units (LTUs). Sources told Business Recorder here on Friday that the audit

coverage for Tax Year 2011 has been given in the Annual Audit Plan (2012-2013).

The targets for audit coverage as against the number of Income Tax/ Sales Tax returns

received for the Tax Year 2011 has been specified by the Board. Out of total income tax and

sales tax returns filed by the large taxpaying units, the field formations have to conduct audit

of 20 percent of the total return filers. In case of taxpayers registered with the Regional Tax

Offices (RTOs), audit of the 5 percent companies cases would be conducted. The FBR has

assigned the RTOs to conduct audit of 3 percent of the non-companies cases.

Out of total return filers within the corporate sector, the audit coverage would be 5 percent.

Out of total income tax and sales tax return filers non-companies cases, the audit coverage

would be 3 percent, audit plan said. According to the audit policy guidelines drafted by the

FBR for the Tax Year 2011, the reasons for initiation of audit and issuance of notice may be

communicated to the taxpayers under the signatures of the Commissioners of Inland Revenue

in the light of relevant statutes.

Audit guidelines said that the audits under the Annual Audit Plan are to be finalised during

the current financial year. However, field formations may prioritise audit cases based on risk-

assessment and initiate cases simultaneously or stepwise, in view of the availability and

capacity of audit officers.

The commissioner shall assign cases for audit to the relevant audit teams to be headed by an

officer of appropriate level. Sectoral expertise of team members may also be kept in view, it

said. The assessment in all cases selected for audit must be made under normal law and no

agreement with the taxpayer is to be made in that respect. Audit guidelines further stated that




25-Aug-12


the Sales Tax Audit Hand Book containing the industry notes on fourteen different sectors of

economy ie sugar, beverages, tobacco and papers boards dc; may also be considered while

conducting audit.

It said that the audits should be completed expeditiously. The estimated time in man days

should not exceed 10 to 15 days depending on the extent of business of the taxpayers. The

Commissioner may, however, increase or reduce this period as per requirement but within the

reasonable bounds.

After consultation with commissioner, the audit authorities must communicate to the taxpayer

the discrepancies found in the audit for his explanation before finalising audit report, Audit

Guidelines maintained. The audit reports may be randomly checked by a committee of

competent officers constituted by Chief Commissioner, to look into the quality issues.

Each and every audit case should he entered into the Taxpayers Audit Monitoring System

(TAMS), developed by, PRAL in co-ordination with the Taxpayers' Audit Wing and installed

in the field formations. Audits must not be initiated without first entering the relevant data

into the TAMS. Any notice or communications (lone otherwise or any deviation from this

policy guideline would be viewed seriously and Chief Commissioners must take suitable

action against the delinquent officers, Audit Guidelines stated.

The Commissioner may not assign more than 04 cases to one auditor/ officer at a time.

However, in case of shortage of officers and staff wore cases may be assigned to individual

officers with the prior approval of the Chief Commissioner. The training needs of the audit

staff may please be taken care of indigenously.

Audit Guidelines further stated that the procedures and guidelines mentioned in the National

Audit Plan/Manual should be strictly followed; and the audits are to be conducted

professionally and with integrity within the legal framework without creating unnecessary

harassment to the taxpayers.

In order to complete the said audits successfully, the role of Chief Commissioners is of

paramount importance. They are expected not only to ensure quick disposal of audits but also

maintain a respectable level in audit quality. In addition to data entry of cases selected for

audit in Tax Audit Management System (TAMS), a monthly report on prescribed formal

regarding audits initiated, completed and the names of the officers/ auditors who conducted

the audits alongwith the amount detected and recovered (if any) may also be sent to the Board

by 5th of the following month, FBR added. The FBR has circulated the Annual Audit Plan

(2012-2013) to the FBR members and the plan will be implemented in the filed formations

incorporating viewpoint of the tax managers.


Annual Audit Plan (2012-13): FBR to select

cases for audit for Tax Year 2011




25-Aug-12


August 25, 2012

The Federal Board of Revenue has decided to select cases of income tax, sales tax and federal

excise duty for audit under new Annual Audit Plan (2012-13) based on computerised

balloting and taking into account risk parameters. Sources told Business Recorder here on

Friday that the FBR has drafted a new sales tax, income tax, and the FED Audit Plan (2012-

13) for the corporate sector and non-companies cases covering the Tax Year 2011.

Under the Annual Audit Plan (2012-13), the identification of cases for full/detailed audit for

the Tax Year 2011 pertaining to income tax and corresponding tax periods covering Sales

Tax and Federal Excise will be made through computer ballot on the risk parameters with the

help of M/s Pakistan Revenue Automation Limited (Pral).

The taxpayers are likely to pay all the three inland taxes, audit of income tax, sales tax and

FED will be taken up simultaneously, the plan added. The basic policy of the Annual Audit

Plan (2012-13) is the selection procedure through computerised balloting using risk-based

parameters under the provisions of the Income Tax Ordinance 2001.

To ensure transparency, M/s Pral shall post the names of the taxpayers selected by the Board

on the official web page for the convenience of the taxpayers. This is an innovative step taken

by newly appointed FBR Member Audit to ensure transparency in the audit processes for Tax

Year 2011. The display of the names of the taxpayers selected for audit would ensure that the

FBR is not conducting audit secretly, but the business and trade is well aware of the units

selected for audit for Tax Year 2011. Under the Annual Audit Plan (2012-13), the FBR has

taken the decision to select cases for audit through computer balloting on the basis of risk

parameters taking into account legal aspects and court decisions.

The Annual Audit Plan (2012-13) said that the FBR is empowered to select cases for audit

under section 214C of the Income Tax Ordinance, 2001, Section 72B of the Sales Tax Act,

1990 and Section 42B of the Federal Excise Act 2005. In a recent judgement in Writ R.P. No

393/2012, the Lahore High Court has declared the notices issued by the Commissioner u/s

177, 25 and 46 of the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise

Act 2005 purportedly calling for the record of the petitioners but in fact selecting the

petitioners for Audit of their tax affairs as unconstitutional. Till the time final picture

emerges, it is advisable to stick to the method of selection of cases prescribed by the Board.

Foregoing in mind, the Annual Audit Plan 2012-13 (Tax Year 2011) is being developed using

risk based auditing as an integral component. The primary purpose of the tax audit is to

monitor and maintain the self assessment system by encouraging voluntary compliance and to

maintain public confidence in the integrity of the tax system through affording an avenue to

educate tax payers on various provisions of the tax law. Considering our experience and the

feedback received from the field formations in the past, the Annual Audit Plan (2012-13) has

been devised by the Board. Taking into account the comments of the FBR Members on the

Annual Audit Plan (2012-13), the FBR will circulate the plan to the field formations for

implementation and selection of cases for audit for Tax Year 2011.





25-Aug-12


Non-corporate/AOPs cases: FBR spells out

20 key risk-based parameters for audit

August 25, 2012

SOHAIL SARFRAZ

The Federal Board of Revenue has drafted 20 key risk-based parameters for selection of non-

corporate cases for audit under Annual Audit Plan (2012-13). Sources told Business Recorder

here on Friday that the FBR has drafted 20 risk-based selection parameters for income tax

and sales tax audit of the non-companies cases including Association of Persons (AOPs).

These risk-based parameters for selection of non-corporate cases are being discussed with the

experts and senior tax officials for addition or deletion of any clause under the Annual Audit

Plan (2012-13). The final risk-based selection parameters for income tax and sales tax audit

of the non-corporate sector would be communicated to the field formations for initiation of

audit. So far, the FBR has selected the following risk based selection parameters for non-

corporate cases - AOPs for audit purposes:

1. Opening Balance not matching with closing balance of previous year.

2. Cost of Sales is more than 80% of total sales.

3. Cost of sales is less than 60% of total sales.

4. Net profit to sales ratio differs from sector ratio by 10%.

5. Percentage of expense to gross profit differs from sector ratio by 10 percent.

6. Gross profit to total sales ratio differs from sector ratio by 10 percent.

7. Total sales on Income Tax Returns differ from total sales from Sales Tax return by 10

percent.

8. Total sales declared in 'Sales Tax Return' differs from total Sales declared in Income Tax

Return by 10 percent.

9. Continuously declaring loss for the last two years.

10. Continuously declaring declined income for the last two years.

11. Total supplies are less than previous year by 10%.

12. Output tax is less than the previous year by 5%.

13. Input tax is more than the previous year by 5%.




25-Aug-12


14. Output tax is different from 15% of taxable supplies.

15. Input tax is different from 15% of taxable purchases.

16. Output tax minus input tax differs from net payment by 5%.

17. Percentage of input/output ratio differs with sectors' ratio by 10 percent.

18. Refund claim is 5 percent more than previous year.

19. Export sales differ from value of export in customs data by 5 percent.

20. Import purchase differs from value of import in customs data by 5 percent.





25-Aug-12


Business & Economy

Greenpeace raids Russian Arctic oil

platform

Friday, 24 August 2012 20:55

Posted by Asad Naeem

MOSCOW: Greenpeace activists on Friday scaled the sides of an Arctic oil platform owned

by Russian group Gazprom to draw attention to the dangers of drilling in one of the world's

last pristine reserves.

Two Gazprom helicopters hovered over the group and periodically sprayed them with

pressurised streams of ice water as they hung down on ropes from the side of Gazprom's huge

red Prirazlomnaya platform, due to start commercial operations next year.

"They're hosing us," Greenpeace International's Executive Director Kumi Naidoo tweeted,

while the team held up bright yellow signs reading "Save the Arctic!" and "Stop Gazprom!"

Naidoo said he did not expect coast guards to reach the remote spot of the inhospitable sea

until Saturday and posted pictures of the team setting up swinging tents in which they

planned to spend the night and have dinner.

The daring raid comes as Russia takes the lead from other Arctic energy powers in exploiting

previously untouched territory for what is believed to be one of the world's largest holdings

of recoverable oil and natural gas.

Gazprom's independent project is due to kick off next year just as fellow state oil firm

Rosneft begins its own initial explorations with new partner ExxonMobil.

The area -- also the subject of territorial rows with resource rivals Canada and Norway -- is

becoming especially attractive as the size of the ice shelf shrinks and conflicts continue to

rattle energy producers in the Middle East.

Greenpeace said its team reached Gazprom's floating production base by launching a pre-

dawn sneak attack by inflatable speedboats from its ship Arctic Sunrise and then climbing

aboard using mooring lines.

Footage shot by one of the crew showed the sea calm but draped in metallic clouds as the tiny

bright orange craft sped through unguarded waters toward the towering crane-mounted

station.




25-Aug-12


"Six climbers have taken up positions on the structure and have interrupted the platform's

operations," the group said in a statement.

The state-owned firm immediately denied any impact on the platform's operations and said

the activists had turned down an offer to enter the base for talks.

"They were invited aboard the platform for a constructive dialogue," a Gazprom spokesman

told Russian news agencies.

"But they refused and said they would prefer to hang off the platform instead."

Gazprom next year will become the first company to start commercial drilling in the Arctic

when it launches offshore operations in the southeastern section of the Barents Sea.

The holding's base runs just west of the developments being pursued jointly by ExxonMobil

and Rosneft in an area viewed by the Kremlin as the main source of Russia's oil and gas in

the new century.

But critics warn that Gazprom's drilling is extremely risky because the platform is sealed in

ice for most of the year and has to work smoothly in temperatures that often plunge to minus

50 degrees Celsius (minus 58 Fahrenheit).

The Gazprom unit plans to drill and process oil before injecting it into tankers -- operations

that have never been performed in such an inhospitable climate before.

Critics say the risk of such work far outweighs the benefits it may offer either the Russian

government or consumers through cheaper fuel.

"The Prirazlomnaya platform will produce no more than seven million tonnes of oil a year,"

Greenpeace Russia director Vladimir Chuprov told Moscow Echo radio.

"And the country needs to produce 500 million tonnes a year."

Copyright AFP (Agence France-Presse), 2012

Weekly inflation increases

Friday, 24 August 2012 15:46

Posted by Parvez Jabri

ISLAMABAD: The Sensitive Price Indicator (SPI) for the week ended on August 23, for the

lowest income group up to Rs.8,000, registered increase of 1.29 per cent as compared to the

previous week.




25-Aug-12


The SPI for the week under review in the above mentioned group was recorded at 182.36

points against 180.03 points registered in the previous week, according to provisional figures

of Pakistan Bureau of Statistics (FBS).

The weekly SPI has been computed with base 2007-2008=100, covering 17 urban centers and

53 essential items for all income groups and combined.

The SPI for the combined group increased by 1.16 per cent as it went up from 186.32 points

in the previous week to 188.49 points in the week under review.

As compared to the corresponding week of last year, the SPI for the combined group in the

week under review witnessed increase of 8.55 percent.

As compared to the last week, the SPI for the income groups from Rs.8001-12,000, 12,001-

18,000, 18001-35,000 and above Rs.35,000 increased by 1.19 percent, 1.18 percent, 1.16

percent, 1.13 percent and 1.16 percent respectively.

During the week under review average prices of 05 items registered decrease, while that of 22

items increase with the remaining 26 items' prices unchanged.

The items which recorded decrease in their average prices during the week under review

included bananas, red chillies (powder), moong pulse (washed), gur and vegetable ghee

(loose).

The items which registered increase in their prices included onions, tomatoes, potatoes,

diesel, petrol, kerosene oil, garlic, chicken live (farm), wheat flour (bag), washing soap,

wheat, mutton, energy savor, LPG ( 11 kg cylender), vegetable ghee (tin), beef, mash pulse

(washed), gram pulse (washed), egg hen (farm), rice (irri-6), sugar and rice basmati (broken).

The items with no change in their average prices during the week under review included

bread plain (mid size), milk (fresh), curd, milk (powdered), mustard oil, cooking oil (tin),

masoor pulse (washed), salt powdered (loose), tea (packet), cooked beef, cooked dal, tea

(prepared), cigarettes, long cloth, shirting, lawn, georgette, sandal (gents), chappal (gents),

sandal (ladies), electric charges, gas charges (upto 100m3), firewood, match box, telephone

local call and bath soap.

Copyright APP (Associated Press of Pakistan), 2012




25-Aug-12


Fuel and Energy: Pakistan

Afghan-Tajik Basin: PPL to participate in

six exploration blocks' bidding

August 25, 2012

Pakistan Petroleum Limited (PPL) was among eight companies world-wide to pre-qualify for

participation in bidding of six exploration blocks in the Afghan-Tajik Basin offered recently

by the Afghanistan government. The Company's officials will be attending a bidder's

conference later this month to sort out modalities involved in the process, a press release

issued here on Friday said.

The move was a part of PPL's strategy to secure international hydrocarbon reserves to meet

the country's escalating energy requirements, it added. "We look forward to expanding our

international exploration assets and will be carrying out due diligence to evaluate the blocks

on offer," said MD and CEO, PPL Asim Murtaza Khan. The decision to participate in the

bidding has the full support of the Ministry of Petroleum and Natural Resources.

The PPL officials attending the conference will also have bilateral discussions on mutual

business interest with other companies, particularly Turkish Petroleum Corporation, the

conference host. However, the company's international efforts will clearly not compromise its

fast-track domestic exploration programme. "There will be zero let-up on our domestic

exploration programme which is top priority for us," Khan assured.-PR


Gas Infrastructure Development Cess:

SNGPL urged to entertain court orders that

suspend raise

August 25, 2012

The Lahore Chamber of Commerce and Industry (LCCI) has urged the SNGPL authorities to

entertain stay orders issued against increase in Gas Infrastructure Development Cess. A large

number of businessmen on Friday called on LCCI President Irfan Qaiser Sheikh again and

informed him that the SNGPL authorities were intentionally making mockery of the High

Court orders issued against the increase in Gas Infrastructure Development Cess and thus

creating troubles for the businessmen who were already facing multiple internal and external

challenges.




25-Aug-12


They informed the LCCI President that instead of entertaining the High Court orders against

unilateral and unjustified increase in Cess, the authorities were telling the complainants that

they had already written letter to the Ministry over the issue and waiting for a reply.

The LCCI President said that all institutions should obey the judiciary orders in letter and

spirit for the rule of law in the country and if the SNGPL authorities were flouting the court

orders they were actually committing the contempt of court. He was of the view that the

SNGPL authorities should not create troubles for the business community and let the courts

decide the matter. By disobeying the courts, the SNGPL authorities are sending a very wrong

signal to the common man.

It is pertinent to mention here that the Oil and Gas Regulatory Authority (Ogra) had made

around 15 percent increase in gas tariff without any prior notice to the industry and put this

raise in the last month's gas bills, resultantly the industry people moved court.

The LCCI President said the raise incorporated in the industrial gas bills for the month of July

had created multiple problems for the industrialists as the authorities kept them in the

darkness about the hike and resultantly they could not include it into their cost.

He said when the government functionaries or ministers visited LCCI, they always vowed to

take the private sector on board on all future decisions but it was very unfortunate this time

they did not bother to consult the LCCI or any other sector-specific association while jacking

up the gas tariff.

Irfan Qaiser Sheikh said the impact of this increase would be much bigger than the

expectation of the government who should avoid any such decision keeping in view the

economic scenario in the country. He said Rs 100MMBTU increase in the gas tariff would

put extra burden on cash starved industry therefore the Ogra authorities should immediately

withdraw this raise.

He said if the Ogra authorities failed to take it back, there were a number of associations who

would be moving court against this unilateral decision. "By making such decisions, the Ogra

is not doing any service to the industry but actually the people are opening up gate for

litigation" he said.

The LCCI President said that at a time when all the governments in the world were

facilitating their respective private sectors, the situation in Pakistan was the other way round

and various government departments were tightening noose around the private sector.

While quoting the example of textile sector, he said it was one of the most value-added and

export-oriented sectors in Pakistan which accounted for more than 60 percent of total exports

of the country. "95 percent of its inputs are locally produced and by making energy out of

their reach, government is in fact curbing the use of local inputs." He said that even the

slightest raise in the cost of production, at this critical juncture, would, therefore, spell doom

and oust Pakistani merchandise from the international export market which would deprive the

exchequer of much-needed valuable foreign exchange to the tune of billions of dollars.





25-Aug-12


Power shortfall rises to 4,000 megawatts

August 25, 2012

The power shortfall has risen to 4,000 megawatt (MW) with end of Eid holidays. An increase

in power shortfall has taken place despite improvement in weather conditions with torrential

rains in Northern areas. According to the Energy Management Cell, power generation

remained 13,341MW against demand of 17,223MW. Meanwhile, the power supply to KESC

yet remained around 700MW.

It may be noted that power shortfall had come down to around 3,000MW during Eid

holidays, coupled with cloudy weather throughout the last week. However, the government's

claim of no load shedding on the day of Eid failed to materialise. Resultantly, the consumers

cursed the government throughout Eid for its false claims.

Not only domestic consumers but the industrial consumers are also facing troublesome

situation, as they are clueless about resumption of smooth supply of electricity after Eid, as

promised by the Prime Minister. The industry circles are afraid that the situation is likely to

aggravate further ahead, as the government would be more focused on election activities

during the months to come. Therefore, they are losing hope with every passing day so far as

end to the phenomenon of load shedding is concerned.


Kapco likely to post Rs 6.1 billion profit

after tax

August 25, 2012

Kot Addu Power Company (Kapco) is expected to post profit after tax (PAT) of Rs 6.1

billion, translating into earning per share (EPS) of Rs 6.95 in FY12, showcasing a decline of

6 per cent on year-on-year basis, analysts said. Similarly, in the fourth quarter of FY12 the

company is expected to post a profit of Rs 1.76 billion with EPS of Rs 2.0, up by nominal 6

percent on quarter-on-quarter basis as compared to the previous quarter, they added.

KAPCO is scheduled to announce its FY12 results on (Saturday) August 28. "Despite 10 per

cent on quarter-on-quarter basis increase in power generation, 30 per cent leap in the

financial charges kept the profitability of the company under check during the fourth quarter

of FY12", Abdul Azeem, an analyst at InvestCap said.

"We expect the company to announce final cash dividend of Rs 2.75/share as well, taking the

total payout for the year to Rs 6.50/share", he added. He said that the company's financial

charges are expected to bump up by 23 per cent year-on-year basis to Rs 10.7 billion during

FY12, as the company's receivables from Wapda are forcing the company to rely heavily on




25-Aug-12


borrowing from the financial institutions.

With the announcement from the government to issue TFCs worth Rs 140 billion to curtail

circular debt, the company has received Rs 35 billion. "Thus it is expected to provide much

needed relief to the company as we expect a sound reduction in the borrowed funds, which in

effect is expected to lower the company's financial charges going forward thus bolstering its

cash flows", he said. Moreover, decline of 5 per cent to Rs 7.9 billion under the other income

head coupled with high financial charges is expected to have further negative impact on the

profitability of the company.


Profit after tax of Pakgen Power Limited

increases

August 25, 2012

The profit after taxation of Pakgen Power Limited has increased to Rs 1.225 billion in the

half year period ended June 30, 2012 as compared to Rs 1.107 billion earned in the

corresponding period in 2011. The company's earning per share increased to Rs 3.29 in the

period under review against Rs 2.98 in the same period last year.

The board of directors of the company in its meeting held on Friday recommended cash

dividend at Re 1.00 per share ie 10 percent. According to the financial results sent to Karachi

Stock Exchange, the company's revenue increased to Rs 13.998 billion in the first half of

2012 against Rs 13.420 billion in the same period in 2011 while cost of sales increased to Rs

12.278 billion against Rs 11.928 billion.

On quarterly basis, the company's profit after tax increased to Rs 502.101 million translating

earning per share of Rs 1.35 in the quarter ended June 30, 2012 as compared to after tax

profit of Rs 452.595 million with per share earning of Rs 1.22 in the same quarter last year.





25-Aug-12


Fuel and Energy: World

Oil drops on reserves release report, storm

limits loss

August 25, 2012

Oil prices fell on Friday after a report that the International Energy Agency is likely to tap

strategic oil reserves as soon as September, dropping its resistance to a US-led plan. US crude

losses were limited because of the threat to Gulf of Mexico production from Tropical Storm

Isaac and that potential supply disruption prompted selling of Brent positions and buying of

US crude, brokers said.

The IEA, whose chief recently dismissed the need for a release, is now thought to have

agreed to the idea, the industry journal Petroleum Economist said, citing unnamed sources.

Reuters reported last week that the White House had begun "dusting off" previous plans for a

possible release from its Strategic Petroleum Reserve because it fears that the sharp rise in oil

prices since June could undermine the effect of sanctions on Iran.

"Oil prices declined on word of a change of heart at the IEA on a co-ordinated release of

global SPR barrels. The market has been very sensitive to speculation over a release, which,

if it were to occur, would work to lower prices for a time," said John Kilduff, partner at Again

Capital LLC in New York. Tropical Storm Isaac took aim at flood-prone Haiti on Friday and

was expected to become a hurricane when it churns into the Gulf of Mexico early next week,

on a path that could see it make landfall anywhere from New Orleans to the Florida

Panhandle.

BP Plc said it was shutting production at its Thunder Horse oil and gas platform in the Gulf

of Mexico, the world's largest, and other producers began storm preparations and evacuating

nonessential personnel. Another potential threat to supply looms after Norwegian oil services

workers broke off wage talks with oil companies on Friday, taking the sector a step closer to

its second strike within two months and leaving government mediation as the next formal

step in the dispute.

Brent October crude fell $1.42 to settle at $113.95 a barrel, having dropped to $113 after

reaching $115.28. Brent fell 12 cents on the week, snapping a string of three straight weekly

gains. Sensitivity to an upcoming maintenance-related drop in North Sea production and

ongoing Middle East turmoil helped Brent hit a three-month peak at $117.03 on August 16,

as the September contract expired and went off the board at $116.90 a barrel, the highest

settlement since May 2.

Brent has recovered from a low of $88.49 posted on June 22 after retreating from the 2012

peak at $128.40 hit on March 1. On Friday, US October crude fell only 12 cents to settle at

$96.15 a barrel, having swung from $95.41 to $97.17, either side of the 200-day moving




25-Aug-12


average of $96.75. US crude managed a 14-cent weekly gain, its fourth straight rise. Prices

have recovered after sliding below $78 a barrel in late June.

Brent's premium to US crude fell to $17.44 a barrel, but increased to $19.09 before pulling

back. US gasoline and heating oil futures fell back, even with the potential for weather-

related refinery disruptions along the Gulf Coast next week. Oil had a muted reaction to

another round of inconclusive talks between the United Nations nuclear agency and Iran.

The UN's International Atomic Energy Agency said important differences remain with Iran

after Friday talks about Tehran's nuclear program and that there were no plans at this stage

for further meetings. Iran's envoy said the talks made some progress, but differences

remained. Israeli Prime Minister Benjamin Netanyahu accused Iran of making "accelerated

progress towards achieving nuclear weapons", adding that it was "totally ignoring" Western

demands to rein in its atomic program.

Copyright Reuters, 2012




25-Aug-12


Miscellaneous News

Meeting of minds: Pakistan, US close to

signing investment treaty

By Our Correspondent

Published: August 25, 2012

Bilateral Investment Treaty (BIT) is a commitment to reciprocally promote and protect

investment, thus Pakistan’s investment in the US will also be reciprocated. DESIGN:

SAMRA AAMIR

ISLAMABAD:

After negotiating for over eight years, Pakistan and the United States will seal Bilateral

Investment Treaty (BIT) on the sidelines of upcoming United Nations General Assembly

session, said Board of Investment (BOI) Chairman Saleem Mandviwalla here on Friday.

To resolve the remaining procedural issues, a six-member US delegation is also arriving in

Islamabad, according to an announcement made by the BOI Secretariat. The UN General

Assembly session will take place next month.

The US team will hold negotiations with Pakistani authorities from August 27-28 to resolve

issues of considerable importance and conclude BIT, it added.

The US and Pakistan are again looking to resume dialogue on various issues including

energy, investment and trade after resumption of Nato supplies. Pakistan had blocked Nato

shipments after the killing of its 24 soldiers in an air attack by US forces in November last

year.

Talks on BIT started in 2004 and continued until 2006 but many issues remained unresolved.

The biggest stumbling block was arbitration rules in case of any dispute.

After a five-year deadlock, the BOI took the initiative to restart the negotiation process in

2011. According to the BOI, consultation with local stakeholders also picked up momentum

to firm up Pakistan’s position on different issues.

In March this year, Pakistan and US initialled the treaty and continued to discuss non-

conforming measures (NCMs), which will be attached with the treaty text as its integral part.

The US is the largest investor in Pakistan and conclusion of BIT will deepen economic and

investment relations. BIT is a commitment to reciprocally promote and protect investment,



http://tribune.com.pk/author/303/our-correspondent/


25-Aug-12


thus Pakistan’s investment in the US will also be reciprocated under international law and

covenants, said the BOI.

It added Pakistan is confident that the two-day discussions will resolve all outstanding issues,

paving the way for signing the treaty as scheduled.

Mandviwalla expressed the hope that BIT will lead to Free Trade Agreement (FTA) between

the two countries, resulting in market access and increase in exports to the US markets and

more investment from the US.

Both the countries have already signed draft of the treaty earlier this year, triggering criticism

and accusations that the BOI had sold the country’s interests.

However, the BOI defended its position, claiming that the US has agreed to a dispute

resolution mechanism where local remedy will be sought first before opting for a state-to-

state resolution or taking the matter to the international court of arbitration.

For the last three years, the US had not been willing to agree to take any disputed matter first

to Pakistani courts.

Insiders claim that from the beginning, the US wanted to include the option of arbitration

even after a decision of the Supreme Court.

According to recent decisions of the international court of arbitration, if the interest of an

investor is harmed because of any of the reasons – a law, a judgment by a court or because of

violation of treaty, the decision of the international arbitration will take precedent. The US is

seeking extraordinary protection for its businesses including security, which has also been

agreed.

Published in The Express Tribune, August 25th, 2012.

IP gas project: Who will finance Pakistan’s

side of pipeline?

By Zafar Bhutta


The project is expected to facilitate the import of 700 million cubic feet of gas every day

through the 2,100-kilometre pipeline. PHOTO: FILE

ISLAMABAD:



http://tribune.com.pk/author/2141/zafar-bhutta/


25-Aug-12


As Russia and China have not given confirmed financing the IP gas pipeline project,

Pakistan and Iran will resume talks in the first week of September to finalise the

arrangement of finance to lay Pakistan’s side of the pipeline.

Russia and China are conducting due diligence of the project although there has been no

response so far, said an official.

Pakistan will also urge the Iranian team to double its pledged amount to $500 million during

the upcoming meeting of the working group on IP gas pipeline project. “Iran has already

committed to raise $250 million financing for the gas pipeline project through its commercial

banks,” sources said.

The project is expected to facilitate the import of 700 million cubic feet of gas every day

through the 2,100 kilometre pipeline which will ease the current energy crisis in Pakistan.

Iran-Pakistan gas pipeline is expected to reach the zero border point in the first half of next

Iranian calendar year beginning 20 March 2013. National Iranian Gas Company (NIGC)

Managing Director, Javad Oji in a recent statement, said that work on the 56-inch Seventh

Iran’s Gas Trunkline from Iranshahr, southeast of Iran to Pakistan border and Zahedan city is

complete and it is expected to come on stream in September 2013.

Coordination committee to meet on Monday

In another group meeting, a special Iranian team will participate in the two-day coordination

committee meeting on the IP gas pipeline project scheduled to meet in Islamabad on Monday

to review progress of the project.

Pakistan and Iran had formed the joint working body to finalise a deal with the latter to lay

Pakistan’s portion of the pipeline during a meeting held in Islamabad on July 17 and 18.

The Joint Working Group comprised experts from technical, legal, financial and commercial

sectors to work out details with respect to implementation of the Iran-Pakistan gas pipeline

project.

“This group will also examine the impact of US sanctions against Iran on IP gas pipeline

project,” sources added. State-owned National Bank of Pakistan (NBP) and Oil and Gas

Development Company Limited (OGDC) walked away from the project last year fearing US

sanctions. In March this year, the world’s largest bank Industrial and Commercial Bank of

China Limited (ICBC) after agreeing to finance Pakistan’s side of the pipeline also shied

away.

“If the two countries reach an agreement, Iran would also provide material for the pipeline,”

source added.

German based firm ILF has completed detailed engineering design of IP gas pipeline project

and according to the interim feasibility report, the cost of the project is between $1.2 and $1.5

billion.




25-Aug-12


“If the project is materialised with the participation of local companies, the cost of the project

fall while the cost would go up if foreign companies complete the project. Sources also hinted

that local and Iranian companies could wrap up the project.


Rupee dips to all-time low against dollar

By AFP


The rupee fell to 94.75 to the greenback in trading in Karach, down from 94.70 on Thursday.

PHOTO: FILE

KARACHI: The Pakistani rupee sank to an all-time low against the dollar Friday on

high oil prices and forex reserve fears as the country prepared to repay nearly $400

million to the International Monetary Fund (IMF).

The rupee fell to 94.75 to the greenback in trading in Karachi on Friday, down from 94.70 on

Thursday, and has now lost 33% of its value against the US currency since March 2008.

“The increase in the international oil price… has affected Pakistan’s foreign exchange

reserves and they could suffer further with the repayment of IMF’s instalment due today,”

said analyst Mohammad Sohail of Topline Securities.

“These factors have contributed to the panic in the currency market.”

An official of the Ministry of Finance said that Pakistan was set to pay $397 million to the

IMF on Friday and hoped it would have a ‘minimal effect’ on the reserves, which stand at

$15.18 billion, according to the central bank.

The official added that Pakistan has already repaid $901.4 million to the IMF in previous

three instalments.

The Washington-based fund bailed out on Pakistan with an $11.3 billion loan package

launched in November 2008 as the country faced 30-year-high inflation rates and fast-

depleting reserves, as well as a deadly insurgency.

Sohail said the panic in the currency market may continue next week, if the international oil

and commodity prices do not stabilise to a comfortable level.

On the other hand, reacting to the news Pakistani businessmen have urged the government to

scrap any further borrowing plans.



http://tribune.com.pk/author/76/afp/


25-Aug-12


Islamabad Chamber of Commerce and Industry President Yassar Sakhi Butt said that the

country has to pay $3.4 billion in 2012-13, $3.43 billion in 2013-14 and $1.35 billion in

2014-15 to retire IMF’s loan and country’s foreign exchange reserves will continue to face

pressure due to the debt servicing in the next three years.

Therefore, the government should not choose short-term gains over long-term economic

instability, he maintained.


‘Donors willing to finance Kalabagh Dam’

By PPI


The construction of Kalabagh Dam has been a longstanding dispute among provinces, which

forced the government to abandon the project. PHOTO: CREATIVE COMMONS

ISLAMABAD: The Punjab Forum, emboldened by the refusal of international donors

to finance Diamer-Bhasha Dam, has asked the government to think seriously about

construction of another big dam called Kalabagh.

“We have already lost over $36 billion due to delay in construction of Kalabagh Dam. The

government must now consider construction of the dam since both the Asian Development

Bank (ADB) and World Bank have no objection to funding the project,” said Baig Raj,

President of the Punjab Forum in a statement issued here on Friday.

However, the ADB had gone back on its commitment to fund Diamer-Bhasha Dam while the

World Bank had already refused to provide money, he said.

A four-year delay in funding added $500 million per year to the $12 billion project and

deprived the country of $8 billion in annual benefits at the rate of $2 billion per year, said

Raj.

The construction of Kalabagh Dam has been a longstanding dispute among provinces, which

forced the government to abandon the project.

“Opposition to Kalabagh is not based on technical grounds, rather it is a political issue being

raised to destabilise the country,” Raj said.

Expressing sorrow over loss of life and property in current floods in Nowshera, he stressed

that the only way to save the city in future was construction of Kalabagh Dam. He held the

Awami National Party (ANP) responsible for the losses as it was one of the biggest

opponents of the dam.



http://tribune.com.pk/author/80/ppi/


25-Aug-12


Raj was of the view that Khyber-Pakhtunkhwa and Sindh would not turn dry after the dam

was constructed, rather these provinces would become barren in absence of this mega project.

“Bhasha Dam will not help irrigate agriculture land as no canal can be made in the hilly

terrain while Kalabagh will irrigate seven million acres of land and produce 3,800 megawatts

of electricity,” he said.


Pakistan slipping below water scarcity level

By APP


Water availability, which stood at 5,300 cubic metres per person per year in 1950, dropped to

almost 1,000 cubic metres in 2011, touching the globally set water scarcity level.

ISLAMABAD: With the country slowly slipping down the scarcity benchmark, it will

be facing a severe water crisis in coming years, which will also harm the agriculture

sector, leading to production loss and food shortage.

Statistics available with the Ministry of Climate Change, the United Nations and other related

government departments reveal that imprudent use of water resources has resulted in multiple

challenges for Pakistan.

Water availability, which stood at 5,300 cubic metres per person per year in 1950, dropped to

almost 1,000 cubic metres in 2011, touching the globally set water scarcity level.

Experts express fear that water availability will further go down in coming years due to

massive wastage and growing population.

It is also predicted that average agriculture produce in the country will drop 25% by 2050 due

to water shortage, resulting in increased poverty and hunger.

The experts point out that over-pumping was depleting the ground water resource while 5,000

million gallons of used and untreated waste water is discharged into rivers and lakes,

polluting the source for recharging the ground water.

According to the United Nations, Pakistan is among those countries, which will face water

crisis in coming years.




http://tribune.com.pk/author/78/app/


25-Aug-12


PEN MARKET FOREX RATES Updated at: 25/8/2012 8:53 AM (PST)

Currency Buying Selling

Australian Dollar 98.6 99.6

Bahrain Dinar 246 248

Canadian Dollar 94.6 95.6

China Yuan 13.1 13.6

Danish Krone 17.5 18.2

Euro 117.6 118.9

Hong Kong Dollar 11 11.7

Indian Rupee 1.65 1.75

Japanese Yen 1.175 1.200

Kuwaiti Dinar 325.6 327.1

Malaysian Ringgit 28 28.5

NewZealand $ 73.5 74.5

Norwegians Krone 17 18

Omani Riyal 242.6 244.1

Qatari Riyal 25.5 25.6

Saudi Riyal 25 25.25

Singapore Dollar 76.1 77.1

Swedish Korona 13 13.5

Swiss Franc 97.5 99

Thai Bhat 2.6 2.7

U.A.E Dirham 25.5 26

UK Pound Sterling 149.1 150.6

US Dollar 94.6 95



http://www.forex.com.pk/inter_bank_rates.asp

http://www.forex.com.pk/inter_bank_rates.asp


25-Aug-12


INTER BANK RATES Updated at: 25/8/2012 8:53 AM (PST)

Currency Bank Buying

TT Clean

Bank Selling

TT & OD

Australian Dollar 98.47 98.68

Canadian Dollar 95 95.2

Danish Krone 15.92 15.95

Euro 118.55 118.8

Hong Kong Dollar 12.17 12.2

Japanese Yen 1.2006 1.2032

Saudi Riyal 25.17 25.22

Singapore Dollar 75.61 75.77

Swedish Korona 14.3 14.33

Swiss Franc 98.71 98.92

U.A.E Dirham 25.7 25.76

UK Pound Sterling 149.72 150.04

US Dollar 94.4 94.6




25-Aug-12


Bullion Rates (Gold Prices) in Pakistan

Rupee (PKR) As on Sat, Aug 25 2012, 03:45 GMT

Metal Symbol PKR

for 10 Gm

PKR

for 1 Tola

PKR

for 1 Ounce

Gold 24K XAU 50,963 59,381 158,516

Palladium XPD 19,913 23,202 61,937

Platinum XPT 47,295 55,106 147,105

Silver XAG 940 1,095 2,923

Gold Rates in other Major Currencies

Currency Symbol 10 Gm 1 Tola 1

Ounce

Australian

Dollar AUD 516 601 1,605

Canadian

Dollar CAD 533 621 1,657

Euro EUR 429 500 1,335

Japanese

Yen JPY 42,174 49,140 131,178

U.A.E

Dirham AED 1,972 2,298 6,134

UK

Pound

Sterling

GBP 340 396 1,056

US

Dollar USD 537 626 1,670



http://www.forex.pk/bullion-rates-gold-24k-xau-pkr.php

http://www.forex.pk/bullion-rates-palladium-xpd-pkr.php

http://www.forex.pk/bullion-rates-platinum-xpt-pkr.php

http://www.forex.pk/bullion-rates-silver-xag-pkr.php

http://www.forex.pk/bullion.php?base=AUD&curr=XAU&type=ounce

http://www.forex.pk/bullion.php?base=CAD&curr=XAU&type=ounce

http://www.forex.pk/bullion.php?base=EUR&curr=XAU&type=ounce

http://www.forex.pk/bullion.php?base=JPY&curr=XAU&type=ounce

http://www.forex.pk/bullion.php?base=AED&curr=XAU&type=ounce

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http://www.forex.pk/bullion.php?base=USD&curr=XAU&type=ounce

Documents

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