ECC decisions

Economic Coordination Committee of the Cabinet took few decisions in its Thursday meeting, Chaired by Advisor to the Prime Minister on Finance Dr. Abdul Hafeez Sheikh. The decisions included purchase of 8.25 million tonnes of wheat from farmers at minimum support price of Rs.1365 per 40 kilograms in the upcoming harvesting season to build stock commensurate with demand of the commodity in the next fiscal year to avoid its shortages. The committee also gave ex-post-facto approval to impose fuel adjustment surcharge on the electricity consumed by agriculture tube wells during the second half of previous financial year from January 2019 to June 2018.

The surcharge of Rs.1 per unit shall be levied in the bills of current month and the remaining amount shall be billed in the next month. It merits mention that in view of escalated production cost of various crops, flat tariff had been allowed for agriculture tube wells to partially compensate farmers for the losses being accrued to them because of unaffordable prices of fertilizers, insecticides, pesticides, better quality of seeds and marketing inefficiencies. Although the reason cited for the imposition of fuel adjustment surcharge on agriculture tube wells is financial stringency that necessitated withdrawal of subsidy on electricity yet the compelling factor seems to be the running default of billions of rupees for several years against 29.0000 tube wells in Baluchistan.

An ambitious target of 8.25 million tonnes of wheat has been set, ignoring the damage caused to the crop by recurring attacks of locust storms in Southern Punjab and interior Sind. The extent of the damage is yet to be calculated. It seems premature to set higher wheat procurement target when uncertainty looms over the yield estimates of wheat crop. Last year two unrealistic decisions were taken about the minimum support price of wheat; first a price of Rs.1350 per 40 kilograms was fixed, and then it was revised upward to Rs.1365forthe same quantity. The production cost of 40 kilograms of wheat has reached to Rs.1350, excluding transportation charges and commission of middlemen. How can a paltry increase of Rs.15in minimum support price encourage small farmers to grow more wheat? It was because of almost zero profit margins that small farmers prefer to grow wheat that suffice their own consumption and have switched over to growing cash crops. Last year, Wheat procurement target of 6.25 million tonnes was fixed but government succeeded in procuring 4 million tonnes and the ill-conceived decision of exporting wheat on subsidized price created acute shortages of the commodity. The decision of imposing ban on the export of onions is commendable as its price registered 120 percent increase in the past few days.

The ECC turned down the proposal of importing 500,000 tonnes of wheat through Trading Corporation of Pakistan to ensure that best quality of this commodity is imported. In the past there had been complaint of importing inferior quality of wheat, which was harmful for human consumption.

The levy of fuel price adjustment surcharge on agriculture tub wells will compel farmers to reduce their running hours, crating water shortages for crops as Agriculture Research Council of Pakistan and officials of provincial agriculture departments are least bothered to assist farmers in using water conservation techniques like drip irrigation. Water shortages will certainly lower yield per acre.

One wonders that on the one hand Prime Minister is extremely worried about the rising inflation but on the on the IPPs lobby manages decisions to include fuel adjustment charges in electricity bills with retrospective effects that fuel further inflation, particularly the food inflation. The share of IPPs thermal power generation in the energy mix has dropped to one percent in the total energy mix and there is glut of furnace oil in the market. Then what is the rationale of adding hefty amounts as fuel price adjustment surcharges in electricity bills, particularly when crude oil prices and that of petroleum products are fast declining despite the cut in production by OPEC Russia and other oil producing countries. Why the rate of increase in power sector circular debt is higher in the present government as compared with previous government even after the induction of cheap hydel power of 2500 megawatts from Neelum Jhelum, Tarbella Extension-4 and Golangoal hydropower plants? The decision about frequent increases in electricity tariffs undoes the efforts of federal and provincial government for keeping prices of food commodities stable.