Category: Business

Islamabad has decided to slash the price of petrol by one rupee per liter for the upcoming fortnight. As per reports, the price of petrol now rests at 254.63 rupees per liter after the cut.

However, the price of high-speed diesel (HSD) will not change and remains anchored at 258.64 rupees per liter. A notification from the finance division has revealed that the Oil and Gas Regulatory Authority (OGRA) calculated the new consumer prices based on price fluctuations in the international market.

At the previous price revision consideration on March 15, the federal government decided to not decrease the prices of petroleum products. Instead of passing on relief to the domestic consumers, the government decided to levy an additional 10 rupees per liter petroleum tax.

This marks the second consecutive period during which the price of HSD has remained unchanged. During Ogra’s price revaluations during the previous fortnight, the price of kerosene oil stood at 168.12 rupees per liter, while the price of light diesel oil sat at a more conservative 153.34 rupees per liter.

According to credible reports, this price notification was released after the Prime Minister’s (PM) office revealed that Shehbaz Sharif intended not to slash petroleum prices despite a drop in the price of commodities in the international market. Brent crude oil futures prices dropped by 0.22 percent over the past month. However, Brent prices have started a rally over the past three weeks – reportedly because of the USA’s sanctions on Venezuela and Iran.

Given the change in international prices, Ogra and the petroleum division had estimated that a cut of 13 rupees per liter was possible to provide relief to petroleum consumers. However, lawmakers and key government officials decided to transfer this relief to electricity users instead.

Previously, Islamabad would charge a tax of approximately 76 rupees per litre on both HSD and petrol. The bulk of this tax is comprised of the petroleum development levy (PDL), which used to sit at 60 rupees per litre, whereas the other charge of 16 rupees goes towards customs duty.

As per the petroleum division, the PDL on High octane blending component has been increased by 20 rupees per liter, causing it to rest at a staggering 70 rupees per liter.

The government has also hiked the PDL on petrol and HSD by 10 rupees for retail sales, after which the levy rests at 70 rupees per litre for both commodities. However, reports suggest that direct sales are incurring a larger PDL of 78.64 rupees per liter.

Pakistan does not charge consumers any general sales tax (GST) on petroleum products. However, fuel suppliers and distributors tack on an additional Rs17 per litre as markup.

The Directorate of Customs Post-Clearance Audit (PCA) South has discovered tax evasion amounting to millions of rupees through a fraudulent company, leading to the registration of legal proceedings against Suleman Industries.

The investigation of business operations at the company (Suleman Industries) led Director of Customs PCA South Shiraz Ahmed to detect unusual activities.

According to reports, PCA DG Dr Zulfiqar Ali Chaudhry ordered the investigation of the company’s manufacturing status – which some suspected the company was misusing. The audit team discovered multiple inconsistencies when examining the available records from Income, sales and customs tax departments.

Authorities launched a ground inspection which showed that the company’s address contained no manufacturing equipment as it did not possess the necessary facilities for production. Reports claim that Suleman industries exploited its manufacturing status to obtain tax exemptions and concessional tax rates even though it did not meet the requirements for these benefits.

The onsite investigation team showed that the company was providing imported embroidery machines to the domestic market, among other items, at lower tax rates. Reports say that officials first suspected foul play when they realised that the volume of imports did not match the financial capacity of the company. Authorities believed that the firm was possibly involved in money laundering given the suspicious nature of the transactions.

Reports reveal that the company was found to be illegally funding imports and evading taxes through the import of embroidery machinery. The firm under investigation was able to successfully procure 2.4 billion rupees worth of goods and its tax evasion tactics resulted in the national exchequer failing to realise over 217 million rupees in revenue.

According to the firm’s own records, manufacturing operations were not being conducted at the address listed in their documents. Investigations revealed that the company rented units to make it seem as if manufacturing was taking place.

However, site locations were not equipped with embroidery equipment and electricity records from the recent past confirmed that no manufacturing operations took place there.

The PCA South filed a Customs Act, 1969 case against the bogus entity which may also face the Anti-Money Laundering Act, 2010 – which concerns trade-related financial crime.

Special teams at PCA continue their active investigation of the matter according to Shiraz Ahmed while striving to prosecute every offender. Authorities are actively on the lookout for Syed Suleman Jafri and his business associates who own PCA.

The most recent treasury bill auctions have allowed the government to obtain 1.67 trillion rupees from private banks and other institutions. As per reports, a staggering Rs1.67 trillion was secured from Pakistan Investment Bonds (PIBs) and Market Treasury Bills (MTBs) auctions that the State Bank of Pakistan (SBP) conducted on Wednesday.

For reference, treasury Bills are issued by the SBP on behalf of the government to raise funds. They are sold at a discounted price and generate a return when the government repays the full face value at maturity to the investor. For instance, if an investor buys a bill for 95 rupees, they receive 100 rupees at maturity, with the five-rupee difference being their profit.

The total submitted bids for the PIB auction reached a respectable 1,132.5 billion rupees, leading to an accepted bid value of Rs980.505 billion – which comprised competitive bids of Rs972 billion and non-competitive bids valued at Rs8.505 billion.

However, the two-year PIBs received no accepted bids in this round, while the five-year investment tenor managed to rake in Rs 16.903 billion at a cut-off rate of 96.8291. The auction leader was the 10-year PIB, which pulled in Rs 963.602 billion at the cut-off price of 92.6071.

Some believe that the reason behind investors choosing longer investment periods is the belief that interest rates will plummet even further, causing investors to prefer locking their funds in at current rates. Alternatively, a rise in investor confidence and the belief that the economy is stabilizing could have caused 10-year PIBs to attract such large investment amounts.

Conversely, concerns regarding the drop in interest rates seem to result in investors favouring short-run investments over locking funds over the medium run. Expectations of further interest rate cuts could be the reason behind this phenomenon as investors believe that interest rates will drop even lower in the coming months.

The State Bank of Pakistan received 1,084.95 billion rupees in MTB bids but chose to accept 689.768 billion rupees, which included 609.95 billion rupees from competitive processes and 29.818 billion rupees from non-competitive processes. The highest cut-off yield of 12.3898 percent appeared in the one-month MTBs, with 12-month MTBs receiving 12.01 percent and three-month MTBs finishing at 11.9999 percent.

Reports substantiate the aforementioned hypothesis as short-to medium-term tenors received stable investor sentiment, according to the measured weighted average yields that spanned between 11.8256 percent and 12.2483 percent.

As per reports, the banking sector demonstrates its dependency on government borrowing through its high demand for longer-dated PIBs, according to the recent results. This is not a new phenomenon as advance deposit ratios (ADR) have remained suboptimal in recent years – as banks remain hesitant to extend credit to the private sector.

Amid rising concerns regarding buyback rates, authorities have decided to take action to address criticism from net metering consumers. According to credible reports, the National Electric Power Regulatory Authority (Nepra) will now revise the buyback rate at scheduled intervals.

Additional changes include limiting the validity of the contract for net meter owners to five years and mandatory updates to inverter standards. However, many agree that the most significant change is the federal government’s shift in stance regarding the buyback rate.

Previously, the government had slashed the buyback rate from a respectable 27 rupees per unit to a measly 10 rupees per unit. This decision was received with significant criticism by net meter owners, leading lawmakers and authorities alike to reconsider the magnitude of the cut in the rate.

The criticism came as net meter owners with solar installations would not be able to recoup their investment in a timely manner given the new buyback rates. Under the old system and rates, it would take approximately two to three years for an investment into solar panels to break even.

As per reports, the power division has already sent ‘policy guidelines’ to Nepra. Officials from Nepra are now supposed to revise the buyback rate, which is expected to be linked to the National Average Power Purchase Price (NAPPP).

Reports claim that the NAPPP faces periodic revisions, which means that buyback rates will now fluctuate as per movements in the NAPPP. These developments emerged after Prime Minister Shehbaz Sharif recently chaired a meeting to address the general public’s concerns regarding net metering.

During the meeting, Shehbaz Sharif issued directives to the power division to make changes to satisfy the public. Some believe, however, that the initial cut in buyback rates was to serve public interest. 

This is because while net meter owners are often met with zero or very low electricity bills, the national grid and its users have to collectively bear an annual cost of 101 billion rupees. 

If left unchecked, this financial burden could balloon to a staggering 545 billion rupees by 2034. A financial burden of such a magnitude would have resulted in non-net meter users bearing an additional cost of 3.6 rupees per unit – which is why authorities initially slashed rates to dampen the rate of solar adoption before the situation deteriorated any further.

Pakistan Railways is set to undergo major upgrades to its existing fleet, as the organisation plans to acquire 12 high-speed passenger coaches by June 2025. As per credible reports, the Islamabad Carriage Factory produces these coaches, which can travel at speeds up to 200 km/h.

The production of such sophisticated technology in Pakistan is being lauded by many, and authorities are attempting to ensure that production efforts continue to be undisturbed. Reports claim that the Minister for Railways, Hanif Abbasi, recently visited the carriage factory to oversee the progress that had been made.

Hanif Abbasi met with Muhammad Yousuf Leghari, a high-ranking official at the carriage factory, who provided him with a progress report. According to reports, this is the first time high-speed coaches are being manufactured domestically.

While this spells great news for the manufacturing sector, as Pakistan is moving towards self-reliance, many have pointed out the lack of high-speed trains in the country to which these coaches can be attached.

In fact, reports suggest that Pakistan’s rail network does not even have high-speed lines and tracks for the most part. As such, some have questioned where these coaches will be deployed by Pakistan Railways.

The manufacturing process falls under the umbrella of an agreement between Pakistan Railways and CRRC Tangshan of China. Details from the agreement, which was inked in 2021, suggest that both parties were supposed to manufacture 230 passenger coaches for Pakistan.

Many believe that the most important clause in the agreement was related to a shift in the production process of coaches from China to Pakistan. This $148 million project is reportedly being carried out under the supervision of a team of Chinese service engineers and is slated to pump out another 184 high-speed coaches by 2027.

The strengthening of domestic manufacturing could allow for Pakistan’s trade gap to narrow significantly. This is because Pakistan will not have to rely on costly imported coaches to enhance its railway network.

Moreover, domestically produced trains could soon find themselves on the trading block with international bidders as output grows past local coach demand. As per reports, the Islamabad carriage factory alone can produce up to 120 passenger coaches per year.

This move comes as Pakistan Railways managed to pull in a record 88 billion rupees in revenue in 2024. As per reports, the implementation of widespread upgrades allowed the entity’s revenues to post a 40 percent year-on-year (YoY) growth rate.

In an effort to reduce the financial burden faced by the power sector, the federal government has inked several deals with Independent Power Producers (IPPs). According to credible reports, Islamabad has been able to reach agreements with seven IPPs and has attained a tariff reduction of 0.5 rupees per unit.

While the tariff cut seems measly at first glance, key officials from the power division have estimated that the tariff revisions could result in 920 billion rupees in savings over the life of the IPP agreements. Details from reports suggest that the savings are linked to capacity payments that have to be made to the IPPs.

However, analysts have outlined how the lifetime savings resulting from the new tariffs pale in comparison to the annual capacity charges that have to be paid to IPPs. Data from reports suggests that the aforementioned capacity charges can run as high as 2.8 trillion rupees in a single year.

Authorities informed the National Electric Power Regulatory Authority (Nepra) regarding the tariff revision in a public hearing that was set on Monday. This development came about as Islamabad inked agreements with Nishat Power, Nishat Chunian Power, Engro Power, Liberty Power Tech, Narowal Energy and Sapphire Electric.

Power Division officials were initially questioned regarding the motivations behind IPPs agreeing to reduce tariffs. Reports reveal that some believed that the IPPs were coerced into giving Islamabad to attain lower tariffs.

However, these allegations were swiftly dismissed by authorities from the power division, who clarified that the IPPs had not signed the agreement under duress. There is merit to this claim, as various IPPs have refused to revise agreements that would favour the general public.

As per reports, Orient Power refused to lower tariffs and, as such, were not included in the list of IPPs with revised agreements. Nevertheless, Islamabad continues to seek better terms with IPPs that refuse to revise the current agreements.

Key officials have explained that the tariff cut is directly linked to the sale volume of electricity. If sales rise, grid users may witness a higher cut. The converse is nonetheless true if sales volume drops as the ‘impact’ may be reportedly wiped out.

However, users of the national grid should not celebrate as the government does not intend to pass on the savings to the general public. As per reports, this is because the International Monetary Fund (IMF) has not allowed Islamabad to pass on the ‘relief’ to users.