Duty-free purchases: Ban on gold import to stay for one more month

ISLAMABAD: The apex economic decision-making body on Wednesday extended the ban on duty-free import of gold for yet another month after government agencies could not devise a foolproof mechanism to stop its smuggling to India. The decision was taken by the Economic Coordination Committee (ECC) of the cabinet that met here under the chairmanship of Finance Minister Ishaq Dar. Separately, the ECC did not take a decision on the award of contract for setting up a fast-track liquefied natural gas (LNG) services terminal at Port Qasim, Karachi, probably for a good reason this time. Dar directed the secretary of the Ministry of Commerce, Federal Board of Revenue and State Bank of Pakistan to hold a meeting with all stakeholders and bring proposals and recommendations in order to ensure export of gold jewellery to the extent of gold imported for value addition, said an official statement. A temporary ban had been imposed on duty-free import of gold in July last year aimed at devising a mechanism to curb smuggling. After India slapped 8% duties to discourage gold import, the buyers had turned focus to Pakistan where the precious metal was being imported duty-free since 2001. For encouraging export of gold products, the government had allowed duty-free import of gold under the “Entrustment” and “Self Consignment” schemes of 2001. However, since July, government agencies could not devise a safe mechanism, leaving no option for the ECC but to extend the ban. Gold smuggling to India was eating up foreign currency reserves that dropped to the lowest level in years. The ECC was told that the reserves stood at $8.6 billion on February 24 including those held by commercial banks. LNG terminal The ECC did not approve a summary of the Ministry of Petroleum and Natural Resources that suggested award of contract for setting up a fast-track LNG services terminal to Elengy Terminal Pakistan Limited (ETPL) – a company owned by Engro Corp. The approval was delayed following objection raised by the secretary of the Ministry of Law and Justice, who said that his ministry had not got the summary and he would not be able to give legal opinion, said officials. The ECC asked the petroleum ministry to get the law ministry’s approval first. According to the proposed LNG services agreement, negotiated between ETPL and Sui Southern Gas Company, the former will charge $0.66 per million British thermal units (mmbtu) in tolling fee. ETPL has also sought comfort letters from the government to the effect that in case of failure to import LNG, the company will be indemnified from its obligations to pay capacity charges. It has also sought a capacity letter from Sui Northern Gas Pipelines (SNGPL) that will ensure that the gas distributor will accept its share of gas delivered under the project. The government is separately negotiating a deal with Qatar for the import of LNG – a project that has dragged on for years amid a worsening energy crisis. Petroleum supplies The ECC was informed that the country had sufficient stocks of petroleum products, which were enough to meet 20 days of requirements. It approved a summary of the Ministry of Petroleum for resuming supplies of petroleum products at six Non-Internal Freight Equalisation Mechanism (IFEM) oil depots. These are situated at Daulatpur, Khuzdar, Sangi, Habibabad, Kundian and Serai Naurang. Because of reduced availability of gas to compressed natural gas (CNG) stations, the demand for petroleum products has increased up to 21% over the last two years, underscoring the need for opening depots to overcome the shortage, according to the handout. By opening the depots, 26,000 tons of storage capacity will be available. Published in The Express Tribune, February 27th, 2014.