ECC decides to discourage subsidies

ISLAMABAD: The Economic Coordination Committee of the cabinet decided on Tuesday to end the practice of allowing subsidies on import and export of essential commodities without examining financial implications and ground realities.
The ECC meeting presided over by Prime Minister Yousaf Raza Gilani took the decision while discussing a proposal to offload wheat stocks to overcome storage problems and liquidity crunch faced by the banking sector.

“The practice should end now,” Adviser on Finance Dr Abdul Hafeez Shaikh was quoted by a senior official as saying at the meeting. He criticised the way the subsidies were being sought to sell wheat and other essential commodities when there is a surplus and to import them at the time of shortages.

Mr Shaikh, who was authorised by the prime minister to chair the ECC meetings in future, said he would not allow any proposal to be taken up by the committee unless all aspects of the issue were sufficiently covered and comments of all stakeholders incorporated into the summary. He said it did not make any sense that some ministries sought subsidies in the event of both shortage and surplus.

The meeting deferred the proposal for offloading wheat stocks. According to sources, the prime minister said the case should be resubmitted to the ECC when a complete picture of wheat situation was available by April 1.

However, the committee approved a proposal to subsidise 100,000 tons of wheat to be provided to the Utility Stores Corporation from Passco stocks to ensure regular availability of flour at USC outlets.

The meeting was informed that the country had stocks of about 11 million tons, including 3.5 million tons of last season’s carryover and 7.3 million tons of fresh crop.

The ECC did not take any other major decision except allowing the issuance of a standby letter of credit of $300 million for import of liquefied natural gas, modifying its earlier decision of providing a sovereign guarantee of $500 million for the project.

Minister for Water and Power Raja Pervez Ashraf informed the meeting that the system would start generating more electricity by the end of next month when the water situation would improve. The prime minister directed the ministers for petroleum and water and power to work on a crash programme to address the issue of power generation.