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ADB's aide-memoir on power sector debts: MoF asked to be tough on banks
ISLAMABAD (March 11 2010): Asian Development Bank (ADB) has advised the Finance Ministry not to bow down before "unreasonable terms by the banks just for the sake of speed," with reference to dealing with power sector debts, according to an aide-memoir, a copy of which is available to the Business Recorder. The Bank has given the deadline of March 31, 2010 to the Finance Ministry for power sector loan transfer documentation, the sources added.
The sources said ADB's mission which visited last month also expressed dissatisfaction over the performance of power sector especially with regard to appointments to a couple of top positions. The mission, sources said, was of the view that transfer of debt incurred by the public power sector companies for the tariff differential shortfall has been delayed.
The mission agreed that the government should not be cornered into accepting unreasonable terms by the banks just for the sake of expediency. The Ministry of Finance has been servicing the loans from July 2009. According to Pakistan Electric Power Company (Pepco), all the performance contracts between the public power sector companies and the Ministry of Water and Power have been signed.
The mission received agreements for three companies in February but may have been provided other contracts as promised by Pepco. The sources said, full implementation of the agreements would take some time since performance targets need to be clearly defined, the terms of reference with performance measures established for each group of staff, and monitoring systems established.
Pepco, the sources said, indicated to have these systems in place by July 2010. As mentioned in the October aide-memoire, the mission requested for a breakdown of the savings realised by the power sector companies thus far in realising their target of Rs 12.8 billion included in the plan.
As informed by Pepco, this is being achieved through forced savings from the O & M budget but ADB is of the view that because of this there is a concern that there may not be adequate maintenance funds. Additional savings and inflow from arrears recovery were estimated at Rs 29 billion in October 2009.
With regard to delayed establishment of Central Power Purchasing Agency (CPPA), the mission expressed its concern again that another target date, December 2009, has been missed. In discussion with the Pepco and CPPA senior director, it was found that the organisation would be within the Pepco group with a CEO and not an independent entity as proposed by ADB consultants with a financially and administratively separate/independent Managing Director.
ADB fully supports an independent transparent entity run by professionals to enhance the credibility since CPPA is at the heart of the sector. Asian Bank had budgeted technical assistance, which would have been available, once the top three persons were filled for an independent entity.
Asian Bank has advised the Pepco to co-ordinate with the power sector companies in the implementation of the plan. According to the Pepco's business plan submitted to the ADB its cost-revenue gap is expected to grow to Rs 177 billion, despite notified increase in tariff and fuel adjustment.
"As planned, Rs 55 billion will be funded through the budget, and Rs 43 billion is expected to be recovered through fuel adjustment tariff increase," the plan said, according to sources. According to Pepco, unrecovered loss of Rs 22 billion during 2009-10 would be passed on to FY 2011 budget, and Rs 57 billion would be collected through quarterly tariff determinations.
Finance has no plan to bail out power and oil sectors
ISLAMABAD (March 11 2010): Despite the fact that power and oil sectors are in critical situation due to circular debt, the Finance Ministry has no immediate plan for fund releases or commitment to bail them out during the coming month of April, Business Recorder has learnt.
After failure of Finance Ministry to resolve the issue of circular debt on permanent basis, which is being faced by Pakistan State Oil (PSO), the National Assembly standing committee on petroleum and natural resources has resolved to take up the issue before Prime Minister Yousuf Raza Gilani.
Sources told Business Recorder that cash-strapped PSO had requested for immediate arrangement of Rs 60 billion to ease its financial woes in a meeting held on Wednesday. Special Secretary, Finance, Asif Bajwa, chaired the meeting which was attended by all stakeholders.
"But Finance Ministry has agreed to release Rs 5 billion to Pakistan Electric Power Company (Pepco), which will make payment onward to PSO," sources said. "Now the third quarter is going to end, and the Finance Ministry will release money during the next month to bail out oil and power sectors," sources said, and alleged that poor recoveries by Pepco were also the main reason of the circular debt. During the meeting, it was stated that Pepco had sent bills to the consumers and would make payment to PSO during next month.
Meanwhile, briefing the NA body on petroleum and natural resources, PSO Managing Director (MD) Irfan Qureshi said that PSO dues against its clients had exceeded Rs 105 billion. He said that PSO required Rs 57 billion to mature Letters of Credit (L/Cs) for oil import. "PSO may default its L/Cs by April 20 if it is not provided Rs 57 billion," he warned.
The Oil and Gas Development Company Limited (OGDC) authorities informed the NA body on petroleum and natural resources that litigation issues were resulting in loss of oil and gas. "The country is losing 6000 barrels per day crude oil, 300 MMCFD natural gas and 500 tons LPG per day due to litigation," OGDC officials said.
Sui Southern Gas Company Limited (SSGC) representative said that the company was to receive Rs 35 billion from its clients on account of gas supply and refunds from FBR. The outstanding of SSGC against KESC stands at Rs 17 billion and Rs 4 billion from Water and Power Development Authority (Wapda). The gas utility is to receive Rs 10 billion on account of refund from Federal Board of Revenue (FBR).
FBR unearths WHT evasion in NSS accounts
ISLAMABAD (March 11 2010): The Federal Board of Revenue (FBR) has unearthed a unique method of withholding tax evasion by unscrupulous elements having saving accounts in the Central Directorate of National Savings (CDNS) where different accounts were opened up to exemption limit to avoid tax payment.
Sources told Business Recorder here on Wednesday that the presently profit earned on the accounts, wherein the average balances within a month do not exceed the limit of Rs 150,000 are exempt from withholding tax. However, withholding tax @ 10 percent is deductible at source on the profits earned on the accounts, where balance exceeds this limit.
The technique, used by some depositors, is to open several saving accounts at different branches of National Saving Schemes (NSS) with the same name. However, the amount deposited is not over and above the exemption limit of Rs 150,000 for avoiding tax payments. In this way, the investment has been scattered in different NSS branches and accounts were opened on different dates. Due to manual system at the NSS, it is difficult to check whether accountholder has opened numerous accounts in other branches to avoid withholding tax.
As there is no computerised linkage between NSS branches, each account has been treated separately; date of investment is different, and monthly interest was paid on different dates. Even accounts have been opened with the same name; the total investment made by a single individual at different NSS branches could not be determined for levying withholding tax.
The detection was made by former Director General of Withholding Tax Muhammad Anwar Goraya who started full-fledged investigation during his tenure. Now, the Directorate General of WHT has also issued instructions to the Regional Tax Office (RTO), Islamabad, to conduct audit of the CDNS to reduce the tax gap between the withholding tax collected and actual potential of the levy, sources said.
They said that the computerised national identity card number (CNIC) could be used as an identifier for checking total investment of individuals at different NSS branches. It is the responsibility of the withholding agent to deduct and deposit the withholding tax into the national exchequer.
Sources said that the FBR is in the process of developing a Web-based design system with the help of Pakistan Revenue Automation Limited (PRAL) to have online information about the investments made by individuals in saving accounts. In this regard, the concerned tax authorities have informed the CDNS for co-ordination purposes. The FBR wanted to conduct audit of each National Saving Centre to narrow down the gap between the actual tax collected and potential of the levy.
The actual gap between the tax due and the tax collected by the CDNS can only be determined by the respective Regional Tax Offices (RTOs) through withholding tax audit of each National Saving Centre located within their jurisdiction. The field formations need to conduct withholding tax audit of each National Saving Centre falling within their jurisdiction.
According to sources, the part of the gap can be attributed to exempt interest on investments/deposits up to Rs 150,000, but the element of leakage or under-deduction/non-deduction cannot be ruled out. There actual gap between the tax due and the tax collection under this head ie interest on profit paid by national savings, could be reduced through regular monitoring.
The gap between the tax due and the tax collected could only be checked by conducting audit of each branch of National Saving Centre. Directorate General of Withholding Taxes has strongly urged the FBR to conduct countrywide special audit of NSCs to ensure proper 'deduction and collection' of the taxes on profit earned through investment made in different schemes, sources added.
'Diplomatic bags' cargo not to be cleared without FO certificate
KARACHI (March 11 2010): The Federal Board of Revenue (FBR) has directed the customs officials not to clear any consignment, even marked as 'diplomatic bags', without exemption certificate of the ministry of foreign affairs. Sources told Business Recorder on Wednesday that the ministry of foreign affairs has revised the rules regarding diplomatic bags and access to tarmac by diplomatic courier after discussion in inter-ministerial meeting on December 31 2009.
They said the ministry had been forced to revise the rules regarding diplomatic bags and access to tarmac by diplomatic courier because of prevailing security situation. They said that all diplomatic bags would now pass through normal scanning process, and no mission would be allowed to bring its vehicles to the tarmac, to collect and dispatch their diplomatic bags or any other cargo.
Sources said that the diplomatic bags should carry the seal of sending country, mentioning 'Diplomatic Bag', and added that the customs officials would only clear permissible items. They said that any consignment in the form of container or crates, even marked as 'diplomatic bag' could not be cleared unless the authority concerned would produce exemption certificate of the ministry of foreign affairs.
Sources said that if any suspicious item is found during the scanning, the matter would immediately be reported to ministry of foreign affairs, and added that action would be initiated as per Vienna Convention, Convention on Privileges and Immunities of the UN, and Convention on the Privileges and Immunities of the Specialised Agencies. Furthermore, they said, access to tarmac/apron would be provided to the concerned mission for incoming and outgoing bags on case to case basis, and the ministry of foreign affairs would recommend such cases.
FBR determined to get cash registers installed at all retail outlets
ISLAMABAD (March 11 2010): The Federal Board of Revenue (FBR) is fully determined to install electronic cash registers at retail/wholesale outlets under value added tax (VAT) regime, which would simplify the accounting procedure and keep an update on stock position in electronic format.
Sources told Business Recorder here on Wednesday that the retailers should not hesitate in installing electronic cash registers, as it would facilitate them in different ways, keeping the units up-to-date on cash inflow and outflow. Installation of electronic cash registers at retail premises is a vital component of VAT regime, as this would help in many ways.
First, accounting system would be simplified for the retail chains through electronic processing of sale receipts removing the hazards of manual processing. Second, the electronic inventory/stock position would be available to the owners and chances of any kind of leakage or tampering of data would not be possible.
Third, electronic cash registers are a major tool of business management for retailers. Fourth, analysis of sales and turnover could easily be done through electronic maintenance of data. Fifth, consumers would have to pay authentic prices of the purchased items as the electronic receipts could be matched with the prices charged at other stores.
It is the right of the consumers to demand invoices from the retailer/shopkeeper for which electronically generated sales receipt is the best option. Sixth, the installation of such registers would bring stability in the prices of commodities on the basis of firsthand data available for comparison.
Seventh, it would generate employment by hiring educated persons to operate such electronic registers. Eight, the biggest advantage is to have documented mechanism for monitoring of sales by the retailers on daily basis. If genuine sales are being determined, it would not create any problem for the retailers, who would be documented under the VAT regime having simply method for payment of refunds, sources said.
They said that the FBR is examining a proposal for provision of free of cost electronic registers to traders to document their transactions for realising the due value of tax. Even if such registers cost a few thousand rupees, it would help in determining the actual sales of retailers, etc. The absence of electronic cash registers at the retail outlets is just like having offices without computers.
Recently, National Assembly standing committee on finance strongly supported a proposal of Munir Quershi, Member, Customs, Federal Board of Revenue (FBR), to install cash registers at retail outlets for documentation of actual sales of traders, retailers and business units across the country.
According to sources, the only way to document actual turnover of retailers is to install cash registers at the business outlets across the country. The taxes from the documented retail outlets and international chains are much higher due to installation of the cash electronic registers at their counters. One of the biggest advantages of installing cash registers is that the equipment cannot be tampered and accurate duties and taxes could be collected from the shops having such cash registers, determining actual sales taking place on daily basis.
17 percent increase in July-February remittances
KARACHI (March 11 2010): Remittances sent from overseas Pakistanis continued to show rising trend as $5,786.89 million was received in eight months (July-February period) of the current fiscal year, showing an increase of $868.26 million, or 17.65 percent, from $4,918.73 million of the same period of last fiscal year. This amount includes $1.0 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).
In February 2010, $588.78 million was sent home by overseas Pakistanis, against $641.32 of February 2009. The inflow of remittances in July-February, 2010 period from UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1,317.17 million, $1,173.37 million, $1,148.86 million, $826.93 million, $596.26 million and $171.41 million respectively as compared to $1,035.55 million, $1,156.51 million, $962.30 million, $783.39 million, $344.08 million and $150.05 million respectively in the July-February, 2008-09 period.
Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first eight months of the current fiscal year amounted to $550.65 million as against $486.34 million in the same period last year. The monthly average remittances for the July-February 2010 period comes out to $723.36 million as compared to $614.83 million during the same period of last fiscal year, registering an increase of 17.65 percent.
During February 2010 remittances from Saudi Arabia, UAE, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $149.45 million, $136.88 million, $111.48 million, $89.21 million, $45.91 million and $13.48 million respectively as compared to $123.64 million, $166.62 million, $127.48 million, $93.09 million, $54.12 million and $18.31 million in February 2009. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during February 2010 amounted to $41.13 million compared with $58.04 million in the same month of last year.
Government may relax quantitative restrictions on yarn export
ISLAMABAD (March 11 2010): On the spinners' threat to go on strike, the government may relax the quantitative restrictions on export of yarn, which was fixed and brought down to 35 million kg per month from 50 million kg. Informed sources revealed that the Textile Ministry is likely to convene a meeting of all the stockholders including representatives of All Pakistan Textile Mills Association (Aptma) and value-added sectors to resolve the issue amicably.
Recently the government had decided to further tighten the quantitative restrictions on export of yarn fixing it at 35 million kg per month instead of 50 million kg. A notification was issued to implement the decision from March 1 to June 30, 2010 to protect the local value-added sector as yarn prices were escalating rapidly with each passing day.
In reaction to the government decision spinners threatened on Tuesday to go on strike if it failed to remove quantitative restriction on cotton yarn exports within ten days. This ultimatum was given by Chairman All Pakistan Textile Mills Association (Aptma) at a press briefing after an emergency meeting of the association. The ultimatum given by the Aptma has compelled the Ministry to take some corrective measures to avoid confrontation. When this correspondent tried to contact Textile Minister, his personnel staff informed that he is busy and not available for comments.
Vice Chairman Seight Akbar told Business Recorder that the yarn export will come to a complete halt within a week after consumption of the entire quota fixed at 35,000 tons per month. As a result the spinners would lose LCs worth millions of rupees in hand on refusing firm export contracts.
He further said that they do not want to see the value-added textile sector to collapse, but there should be a judicious decision with regard to yarn exports. Sources maintained that the decision was taken to support the value-added sector, which suffered due to sky rocketing yarn and raw cotton prices in the local market.
Yousuf and Younus banned by PCB
LAHORE (March 11 2010): In an unprecedented move aimed at ensuring discipline in national cricket team, Pakistan Cricket Board (PCB) following recommendations of Inquiry Committee on disastrous tour of Australia, has slapped a ban on senior cricketers Mohammad Yousuf and Younis Khan for an indefinite period.
Former skipper Shoaib Malik and pacer Rana Naveed-ul-Hassan have been banned for one year while Kamran Akmal and Umar Akmal, who were found guilty of defying the PCB's orders, have been fined Rs three million and Rs two million, respectively. All-rounder Shahid Afridi, who was involved in a ball-tampering incident, was also fined Rs three million and he along with Akmal brothers will be kept under probation for six months.
A PCB spokesman said here Wednesday that recommendation of the inquiry committee regarding Mohammad Yousuf and Younis Khan is not for a life ban. "There is no specified term in the recommendation for these two players. As and when the PCB deems appropriate, these players will be considered for selection for the national team," he said.
Sources in PCB told Business Recorder that Mohammad Yousuf and Younis Khan had only been banned for international cricket. They will not be part of national team, but they can play domestic cricket. After the dismal tour of Pakistan cricket team to Australia, the Chairman PCB constituted a Committee to assess and evaluate the performance of players on the tour.
The Committee consisted of Wasim Bari (Chairman), Wazir Ali Khoja, Yawar Saeed, Zakir Khan and Taffazul Haider Rizvi as Members held a series of meetings and finalised recommendations. Wasim Akram was also appointed member of the body but he did not join it.
Sources claimed that all the seven penalised cricketers have a right of appeal against the punishments and they can lodge appeal with the Chairman PCB. According to them, Younis and Yousaf had to face action due to their infighting, which resulted in bringing down the morale of the entire team. Shoaib Malik and Rana Naveed had to face one-year ban and a fine of Rs two million each for indiscipline. Shahid Afridi was punished with fine for the shameful act of ball tempering by biting the ball, while Akmal brothers had to face action for defying the PCB's orders.
Pakistan lost three test, five one day international series besides losing the lone T-20 match in its tour of Australia. Moreover, former cricketers expressed mixed reaction over action of PCB. The former Pakistan captain, Inzamam-ul-Haq, opposed the ban imposed on Mohammed Yousuf and Younis Khan.
He said, "These decisions were taken by the PCB employees, as no member of the Inquiry Committee was impartial except Wasim Akram, who had not joined the inquiry proceedings." He said the ban on the two senior most players is unfair.
Former chief selector of the Pakistan Cricket Board (PCB) Abdul Qadir in his reaction hailed the PCB's decision to ban Mohammed Yousuf and middle order batsman Younis Khan besides imposing ban and fines on other cricketers. Qadir termed the PCB's decision as 'bold' and said the board should stick to its decision, as the decisions taken by it in the past were never put into action.
Zardari and Karzai resolve to remove differences
ISLAMABAD (March 11 2010): President Asif Ali Zardari and his Afghan counterpart Hamid Karzai on Wednesday held wide-ranging talks, mainly focusing on jointly fighting terrorism, strengthening bilateral ties and ways to address regional issues relating to peace and security. President Karzai, who is on two-day visit, held a meeting with President Zardari soon after his arrival at Aiwan-e-Sadr here.
The two leaders who have frequently met in the past have expressed the resolve to remove misunderstandings of the past and to jointly move forward in the fight against militancy. During the exclusive and delegation level talks President Zardari stressed enhanced interaction between the two countries to better cope with the issues of terrorism and extremism.
He said unity, sovereignty and territorial integrity of Afghanistan were of great importance and termed terrorism, as a common challenge to Pakistan and Afghanistan. He said Pakistan was determined to fight militancy till the end, which was a long drawn battle and there were no quick solutions to this problem.
During the delegation level talks, President Zardari was assisted by Foreign Minister Makhdoom Shah Mehmood Qureshi, Defence Minister Chaudhry Ahmed Mukhtar, Interior Minister Rehman Malik, Foreign Secretary Salman Bashir, Secretary General to the President Salman Farooqi and Spokesman to the President former Senator Farhatullah Babar.
President Karzai was aided by Afghan Foreign Minister Dr Zalmai Rasoul, National Security Advisor, Dr Rangin Dadfar Spanta, Education Minister, Dr Farooq Wardak and Afghan Charged' Affaires, Majnoon Gulab. President Zardari said Pakistan believes that military action alone was not a solution to the problem. He stressed the need for greater economic co-operation, adding the government was determined to correct the past mistakes to carve out a better future for posterity.
Afghan President Karzai urged for a partnership, which allows realisation of the full potential of human and natural resources and want greater connectivity, more trade and economic co-operation. He called for new development projects and investments in the two countries driven by energy corridors in the region. Karzai thanked Pakistan's support and efforts for the rehabilitation and reconstruction of Afghanistan.
President Zardari pointed that Pakistan's bilateral trade with Afghanistan stood at $1.4 billion in 2008 and there was a vast economic potential and great opportunities for co-operation. He said the Afghanistan Pakistan Transit Trade Agreement was under negotiations and hoped it would further boost economic interaction.
President Zardari also pointed to the over 3 million Afghan refugees that were still in Pakistan and said an early restoration of peace and normalcy in Afghanistan will enable the return of these refugees to their motherland. The two sides focused on the need for greater harmony between the two countries.-PR
AFP adds: President Asif Ali Zardari called for a Marshall Plan for Afghanistan, which is also fighting Taliban insurgents. The two countries should "stand together and persuade the international community to devise a Marshall Plan for the region to banish the militancy.
Zardari endorsed a suggestion by his Afghan counterpart to convene a "Pak-Afghan Peace Jirga", a meeting of tribal elders and senior government officials from the two countries. Karzai will hold talks with Pakistani Prime Minister Yousuf Raza Gilani Thursday.
Six killed as gunmen storm US-based NGO in Mansehra
PESHAWAR (March 11 2010): Militants armed with guns and grenades stormed the offices of a US-based Christian charity in Mensehra on Wednesday, killing six aid workers. The gunmen seized the World Vision building near Oghi in the Mansehra district of NWFP. Police and World Vision's regional spokesman said five Pakistani staff, including two women, were killed and seven other employees wounded when up to 15 gunmen arrived in pick-up vehicles and began firing on the aid workers.
"They gathered all of us in one room. The gunmen, some of whom had their faces covered, also snatched our mobile phones," said World Vision administration officer Mohammad Sajid, who was in the office at the time. "They dragged people one by one and shifted to an adjacent room and shot and killed them." The dead included Kahkasha, Zaryab Yousaf, Jamshed, Liaqat, Muhammad Ayaz and Naeem whereas the injured include Khoshboo, Shahida Bibi, Qazi Ahsanullah, Imtiaz, Abid Naeem and Munir.
The wounded were rushed to Oogi Hospital. According to the police eight to ten militants attacked the NGO office. Rienk van Velzen, World Vision's regional communications director, told AFP by telephone from the Netherlands that all staff in the office were Pakistani. "The sad news is that five local colleagues were killed - three male and two female. We have seven colleagues injured," he said.
The organisation has been operating in the area since October 2005, when aid workers flooded into the north-west after a 7.6-magnitude earthquake killed more than 73,000 people and left about 3.5 million homeless. Police officials said the militants on Wednesday opened fire and detonated hand grenades at the site near Oghi, about 80 kilometres (50 miles) north of Islamabad, killing the five before disappearing into the hills.
"Police rushed to the area after receiving information about the attack, but the attackers managed to flee," senior police officer Waqar Ahmed told AFP. "We chased them, there was an exchange of fire, but the gunmen escaped into the mountains." Ahmed blamed the attack on "the same people who are destroying our schools" - a reference to Taliban militants opposed to co-education who have blown up hundreds of schools across the north-west in the past three years.
"Now they want to disturb relief work in quake-hit areas," Ahmed said. Azam Tariq, a spokesman for the Pakistani Taliban, said he was unaware of Wednesday's attack, telling AFP by telephone: "I have no knowledge about the incident and would not like to offer any comment."
World Vision's website describes the group as "a Christian relief, development and advocacy organisation" founded by a US priest. It says the aid group is "inspired by our Christian values", but stresses that the organisation does not proselytise or make aid conditional on a person's faith.
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