Pakistan-Russia final crude oil import talks start today in Karachi
- PSO has been nominated on behalf of Pakistan for talks.
- Russia’s PSC has been nominated for the talks by Moscow.
- The PSC delegation arrived in Karachi on Monday.
ISLAMABAD: A Russian technical delegation will hold talks today (Tuesday) with Pakistan State Oil (PSO) officials in Karachi, to give final touches to a crude oil import deal at a government-to-government level (GtG), a senior Energy ministry official told The News.
“In case of successful talks, both the state-owned nominated companies will sign the commercial agreement the next day (March 22),” said the official who spoke on the condition of anonymity.
PSO has been nominated as the state-owned company on behalf of Pakistan for talks and signing of the Russian crude oil import deal. The Operational Services Center (PSC), which is a state-owned company of Russia, has been nominated for the talks by Moscow.
The PSC delegation arrived in Karachi on Monday.
Both the PSC and PSO may ink the deal, as the delegation from Moscow will hold talks on March 21-22.
“The current price of Brent crude has come down to $73 per barrel whereas the Russian crude oil price remained at $52 in February 2023, which has further lowered between $42-48 in the international market,” sources within the industry told the publication.
They urged Pakistan refineries to purchase Russian oil on their own in compliance with the G7 countries’ regulations. However, the government is trying to secure a GtG deal below the $60/barrel price cap imposed by G7 countries.
Under the GtG deal, Petroleum Division wants to lock the deal at close to $50/barrel, $10/barrel below the cap price. The G7 countries had imposed a price cap on Russian oil in the wake of the war on Ukraine.
Some official sources say that Russia wants to confirm if Pakistan really wants to purchase its crude as there is no written direction from Pakistan’s top man to purchase the Russian crude. However, Pakistani officials are exploring options to purchase crude from Moscow under the direction of Pakistan’s prime minister.
“So far Russia has not indicated what discount it will offer.”
The Russian side will finalise with PSO all the prerequisites before inking an agreement that includes the mode of payment, shipping cost with premium, and insurance cost. The officials said that Russia’s PSC may offer a discount on the base price in its talks with the PSO’s technical team.
They added that the shipping of crude oil from Russian ports would take 30 days and an additional per barrel transportation cost would be $10-15/barrel.
The government does not want to divulge the mode of payment to Russia against the import of crude oil. However, the authorities are weighing their options to either use Pakistan National Shipping Corporation ships for transporting crude from the Russian port or to use the Russian tankers.
“We also have to keep in mind the landed cost of Russian crude as the crude vessel will arrive in 30 days, owing to which per barrel shipping cost would hover at $10-15,” the official said, adding that Moscow has not agreed on the discount yet. “We fear that the maximum discount would be offset by the shipping cost of the crude oil.”
However, State Minister for Petroleum Musadik Malik in a televised presser said that Pakistan would get a 30% discount on crude oil prices. Malik, while talking on Geo News programme Capital talk last week, said 80-85% of negotiations with Russia were completed.
“Our commercial deal is in the final stages, and by the month of March the entire commercial deal will be negotiated,” he said. “In April, we will give them the first shipping order. The first cargo of crude oil from Russia will arrive in by the end of April,” the state minister said.
The minister revealed that the country would receive one-third of its crude oil imports from Russia at a concessional rate “the impact of which will be translated to the people.”
“The first crude oil vessel from Russia will arrive at the end of next month of April as a test cargo to assess the landed cost of crude as compared to the cargo Pakistan gets from ADNOC and Saudi Aramco. Pakistan has sought a 30% discount in Russian crude base price.”
In case, the test ship’s cost is found low enough to bring down the prices of petroleum products, Pakistan would give a green signal for the import of Russian oil in a month which may be 2-4 cargos.
Since Pakistan is facing a US dollar liquidity crunch, it would pay Russia in the currencies of friendly countries that include China, Saudi Arabia, and UAE. The officials said that the ship carrying Russian crude will have the NICL’s (National Insurance Company Limited) insurance and Pakistan Reinsurance Company Limited (PakRE) will reinsure the asset (ship with crude oil).
The State Bank of Pakistan, which earlier showed hesitance for any transaction with Russian banks keeping in view the G7 regulations and the US and EU countries, has now shown a willingness to talk with the Russian counter bank over a payment mechanism for oil import in three currencies other than dollars.
Govt mulls slashing duty on mobile phones in budget
ISLAMABAD: The Federal Board of Revenue (FBR) is mulling options to reduce the duty on mobile phones in the federal budget for the fiscal year 2023-24 — which is expected to be unveiled on June 9 — keeping in view the suggestions of Pakistan Mobile Phone Traders, The News reported Monday.
Previously, the government was obliged to raise the duty on mobile phones by 100% to 150%, and resultantly, only Rs5 billion to Rs10 billion were being deposited in the national exchequer instead of Rs85 billion.
The number of mobile phone users in Pakistan has exceeded 186.9 million.
In order to cope with the financial crisis of the current financial year, in the new budget, a proposal for a conspicuous reduction in the rates of duties on cellular phones is under consideration, which is about 100% to 150% at present on small and big mobile phones.
The mobile industry is on the brink of collapse due to an increase in taxes. It not only affected traders but also made the life of millions of people difficult to earn a livelihood.
It has been learnt that a delegation of the Mobile Phones Traders Association has given recommendations to Finance Minister Ishaq Dar and other senior officials.
The delegation ensured that efforts would be made to include the recommendations in the budget. These proposals and recommendations are being reviewed to make them a part of the new budget.
It has been learnt that a 75% duty was imposed on cellular phones in Pakistan as compared to other countries of the region like Singapore, Bangladesh and Turkey where it is not at that level. That is the reason people are using smartphones without paying duties in connivance with FBR.
The additional 100% to 150% duty on cell phones has made it out of reach of the poor, labourers, daily wagers, students, professionals, the lawyer community, and civil society.
All Pakistan Mobile Phones Traders Association General Secretary Munir Beg Mirza said that due to the ban on the import of used mobile phones, smuggling has increased to give favour to a few companies.
Also, people are using smartphones illegally without paying heavy taxes to enjoy all functions of smartphones, which is inflicting a loss on the national kitty.
He said that not only every consumer would pay tax but also the government would get Rs100 billion instead of Rs5 billion on phones if an appropriate duty was imposed in the new financial year.
Pakistan agrees to share budget details with IMF to unlock stalled programme
- “Pakistan has already completed all conditions of IMF,” Ishaq Dar says.
- FinMin says some powers do not want economic stability in Pakistan.
- Financial czar slams Imran Khan-led govt for violating pact with IMF.
Finance Minister Ishaq Dar has revealed that the coalition government has agreed to share details of its upcoming budget details with the International Monetary Fund (IMF) in order to unlock the stalled funds.
“They have asked us for some more details like the details of (the) budget, we will give that to them,” Dar said while speaking on Geo News programme Jirga on Sunday.
He reiterated that the country has fulfilled all conditions laid forth by the Washington-based lender to revive the stalled $6.5 billion programme and urged the global lender to release the funds before the upcoming federal budget due next month.
The financial czar said some powers do not want economic stability in Pakistan and blamed the previous Pakistan Tehreek-e-Insaf (PTI) government for “destroying” the country’s economy.
“Record inflation was witnessed during Imran Khan’s tenure,” he said, adding that the former prime minister did not honour the agreement with the IMF.
The IMF’s $1.1 billion funding to Pakistan, which is part of the $6.5 billion rescue package agreed in 2019, has been held up since November.
The IMF and Pakistan held two weeks of talks in February in Islamabad to conclude the 9th review, but the lender has not yet released the money, which is critical for the country to unlock other bilateral and multilateral financings.
The federal minister further said that he would want the IMF to release the funds before the budget was presented, which is due in early June. He added, “We will not do the 9th and 10 reviews together. This is unfair.”
Pakistan is making last-ditch efforts with the IMF to revive the stalled Extended Fund Facility (EFF) programme, The News reported earlier this month.
The hopes are diminishing each day mainly because the ongoing programme of $6.5 billion under the EFF will expire on June 30.
The parleys between Pakistan and the IMF continue for the completion of the ninth review, which was due on November 3 of last year. The formal negotiations started on January 31 when an IMF delegation visited Pakistan for in-person talks.
However, the two sides could not reach a consensus during the course of scheduled talks that ended on February 9. Since then, multiple online sessions have been held but the differences persist on conditions set by the Fund for the Staff Level Agreement (SLA).
If the SLA is not struck ahead of the upcoming budget for 2023-24, scheduled to be unveiled on June 9, the ongoing programme will face a failure.
“There are a couple of options left for moving forward. The first is by signing the SLA on an immediate basis and forwarding Pakistan’s request before the IMF Executive Board for approving the next tranche of $1 billion and also securing an extension in the EFF programme period by a few months in order to accomplish the 10th and 11th Reviews,” sources, privy to the background discussions told the publication.
The second option could be combining the 9th and 10th reviews and for Pakistan to share upcoming budgetary numbers with the IMF.
Then the SLA should be signed after the announcement of the budget and in case of its approval from parliament, the IMF’s Executive Board could approve combined tranches and also grant an extension to the EFF programme for accomplishing the 11th Review by July or August 2023.
“There are no easy options available; both sides will have to work out modalities for evolving consensus. But with the existing approach of maintaining the status quo, no breakthrough can be achieved,” said the official who spoke on the condition of anonymity.
High electricity prices moving beyond consumers’ affordability: study
A study found that rising electricity tariffs are increasingly moving beyond the affordability of the masses and adversely impacting their consumption patterns.
The study was conducted by the Institute of Policy Studies, Islamabad titled “Impact of Rising Electricity Prices on Consumer Behavior: The Case of Power Distribution Companies in Pakistan”.
The research study covered over 1,000 households and 140 shop owners in the top 10 cities of Pakistan.
The survey results indicate that most of the respondents have experienced moderate to significant increases in their electricity bills in recent months.
The study further highlights the correlation between the magnitude of the bill increase and the extent of consumption reduction, indicating that higher price hikes lead to more significant efforts in reducing electricity usage.
However, despite the overall reduction in electricity consumption, a significant portion of the survey participants reported no noticeable decrease in their bills.
It recommends the need for improved governance and regulatory measures in the energy sector along with affordable electricity tariffs and alternative payment options to accommodate different economic circumstances.
The study also stresses the importance of addressing issues such as load shedding and raising consumer awareness about peak hours when electricity costs are higher.
Moreover, it also found that the alarming trend also caused a sharp decline in the recoveries of distribution companies (DISCOs) which can lead to difficulties in paying for power purchases from the generation companies, maintaining distribution networks, and servicing debts.
These factors further hinder the ability of DISCOs to invest in infrastructure upgrades, provide quality services, and improve the overall reliability of electricity supply.
The research emphasises effective measures to address power affordability concerns and suggests strategies for distribution companies to mitigate the negative effects of rising prices.
Overall, the study provides valuable insights into the impact of rising electricity prices on consumer behaviour in Pakistan and offers recommendations for DISCOs and policymakers to address affordability concerns and ensure a sustainable balance between electricity prices and consumers’ ability to bear these costs.
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