PTI govt waives guarantee fee on Chinese loans taken to build nuclear plants in Karachi

The federal government has waived the guarantee fee on the Chinese loans being taken to construct two nuclear power plants in Karachi and also sought a report on the total outstanding employee-related liabilities of the Pakistan Steel Mills (PSM). 

The Economic Coordination Committee (ECC) of the Cabinet on Wednesday approved to write off 0.5% guarantee fee on the foreign loans of the K2/K3 projects. The decision will help reducing the power projects construction cost by Rs12 billion, said a handout of the Ministry of Finance.

 Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh chaired the ECC meeting. 

China had extended $6.5 billion loans for the construction of the Karachi Nuclear Power Plants which have a combined generation capacity of 2,200 megawatts. 

About $810 million loan was disbursed to the Economic Affairs Division (EAD) and $5.6 billion were shifted to the books of the Pakistan Atomic Energy Commission (PAEC). 

The finance ministry said a report prepared by the PAEC and the EAD suggested that there will be a benefit of Rs0.07/ kilowatt-hour (KWh) to the general public by the waiver of this fee.

The government has already provided Rs108 billion benefit to the PAEC by lowering the interest rates to the actual rates being charged by China on these loans. 

Usually, the federal government charges 15% interest rates from the attached departments and the provincial governments to cover the exchange rate risks. 

The Exim Bank of China has lent these loans at the interest rates ranging from 1% to 6% and reduction in interest rate would have helped to lower the per unit electricity price by Rs1.8 per unit. 

PSM liabilities

The ECC also took up the summaries of the Ministry of Industries and Production for the disbursement of salaries of the employees of the PSM and for clearing the liabilities of the retired employees who have not approached the Sindh High Court (SHC).

The ECC approved an amount of Rs3.85 billion due to the employees of the PSM for the financial year 2020-21 to be disbursed every month.  It agreed in principle that the dues to the retired non-litigant employees should be paid.

The ECC directed the Ministry of Industries and Production to present a report on the nature of liabilities due to the PSM on account of retirement dues, the liabilities that will accrue as a result of the retrenchment plan and other expenditures on account of utilities or any other charges due on the PSM. 

Earlier, this month the retired employees of the PSM were paid Rs12.7 billion as retirement dues but the court has asked to pay the non-litigant retired employees as well that will further add Rs11.7 billion to the expenditure of the federal government.

The PSM employees’ retrenchment plan was presented before the Supreme Court of Pakistan in July. The apex court has sought a report on the PSM within four weeks. 

Other issues

For the centralised procurement of vaccines under the Expanded Programme on Immunization (EPI), the ECC approved the shifting of Federal EPI from development to revenue expenditure with an allocation of Rs9.9 billion through technical supplementary grant for vaccine procurement in this fiscal year to avoid interruption in the immunisation programme.

The vaccine will be procured by the federal government on behalf of the provincial governments and later reimbursement will be made by the Punjab and Sindh governments and deduction at source from the shares of the Khyber-Pakhtunkhwa and Balochistan for their respective vaccine shares will be made.

In order to increase the share of man-made fibres (MMF) in the textile goods for better unit prices in the international markets, the ECC approved to waive additional customs duty and regulatory duty (RD) on 164 tariff lines of the textile sector. The total revenue impact of these exemptions will be Rs533 million.

The additional custom duties and regulatory duties on fibres, yarns and fabrics of nylon, viscose, acrylic, ryon, silk, wool and vegetable based fibres like hemp have been removed. 

The ECC allowed notifying the Kharlachi Border Crossing between Pakistan and Afghanistan as a rebatable border point for export of goods to Afghanistan. Earlier the opening of this border point helped in the release of congested transit trucks at the Afghan border due to Covid-19 restrictions.

The ECC allowed the exemption from re-lending of the funds for the Pakistan National Emergency Preparedness and Response Plan for Covid-19 to cover the country’s requirements for 12 months through emergency operations. 

In order to administer the programme, the Asian Development Bank (ADB) shall provide a loan of $100 million. An additional $5 million will come from Norway as a grant administered by the ADB.

Norway had extended the grant for the earthquake victims of 2005 but the amount remained unutilised for one and half decades.

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