Nominal fall in LPG prices likely

LAHORE: Following the reduction in Saudi Aramco contract price for LPG, which fell from $974 to $955 per ton, local LPG prices are likely to decline by Rs1,900 per ton or almost Rs2 per kilo with effect from Jan 3, 2013, according to an announcement by then LPG Association of Pakistan.

“The market was anticipating a far greater decline given the already high CP of December, but demand from Western Europe and China has remained strong” said Belal Jabbar, the spokesman for the LPG Association of Pakistan.

Under the present pricing regime whereby local producer prices are indexed to Saudi Aramco CP, LPG producers are likely to reduce their price by a nominal amount of Rs1,900 per ton.

“The actual impact of the decline may not be felt in the market since any decline in CP will be offset by the depreciation in Pak rupee,” he said.

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LTU Karachi recovers 99pc of withholding tax

KARACHI: The Large Taxpayers Unit (LTU) Karachi has recovered 99 percent of withholding tax by collecting Rs6.07 billion of the notices sent for recovery of Rs6.12 billion, according to the data released on Monday.

About the achievements and performance of all tax departments for completing withholding audits and recoveries made by June 30, the data revealed that the Federal Board of Revenue (FBR) recovered Rs19.91 billion against the audit demand of Rs28.711 billion, making recovery of 69.37 percent.

The FBR initiated audit of withholding taxes as some taxpayers collected tax on behalf of the revenue body during transactions but they do not comply and avoid or evade the taxes and not remit them to the exchequer.

Tax officials said that the FBR launched the drive to detect flaws in the withholding tax collection by conducting audit, which resulted in significant recovery.

The FBR data revealed that in the audit and recovery performance, the LTU Karachi topped, followed by the LTU Lahore, which collected Rs2.67 billion and the Regional Tax Office (RTO) II with the collection of Rs1.34 billion.

The FBR officials said that the recovery was made possible during the last fiscal year after tax departments initiated monitoring of withholding tax deducted by banks.

It was witnessed that several banks have not complied with the laws regarding withholding tax collection and either avoided the taxes or evaded.

They said that during the current fiscal year, the FBR offices would continue with the detection of concealed amount under withholding tax. The major sectors would remain in focus, including banks, telecom and oil companies.

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KSE index performed well

 

KARACHI: The Karachi Stock Exchange’s benchmark 100 index performed well in 2012 and recorded a growth by 5,558 points, or 49 percent, to close at 16,905.33 points on December 31, against 11,347.66 points on December 31, 2011.
Hasnain Asghar Ali, chief operating officer at Escorts Capital, said that the KSE proved that it is still one of the best equity markets of the world with impressive gains, dividend yield and consistency of improvement in policies. “Despite struggling economy, energy shortages and the rupee depreciation along with the poor law and order situation across the country, the KSE-100 index went up by 5,596 points to 16,943 points in the calendar year 2012, showing an increase of 49 percent year-on-year, he said.

The upward movement of the index began after Finance Minister Hafeez Sheikh announced alteration in the capital gains tax (CGT) collection in January 2012, which revitalised investors’ confidence across-the-board. Moreover, earnings and payouts have been historic along with decline in inflation to 7.36 percent for the first half of the financial year 2013, followed by cut of 250 basis points in the discount rate to 9.50 percent.

It was the cement sector where the real rally came from and followed by textile and foods. The cement sector reported a surge of 151 percent, translating into an increase of 102 percent against the KSE-100 index. Other outstanding sectors included textiles with 100 percent increase and food sector 74 percent. Notable companies have been KOHC, FECTC, CHCC, MLCF, PIOC, CML, KTML.

The investors who took exposure in the cement stocks at the beginning of 2012 have more than doubled their investment. According to a report of Topline Research, cement stocks at the Karachi bourse rallied and posted an abnormal return of around 150 percent in the calendar year 2012. Around 21 companies, dominated by energy and banking firms, outperformed the benchmark KSE-100 index during 2012. Improved profitability of the cement sector due to record margins coupled with some improvement in the local demand made the investors’ darling in the outgoing year.

Besides improvement in the sector dynamics, sharp decline of 450 basis points in the policy rate during the last 18 months also improved earnings outlook for the cement companies as cumulative debt of all listed companies is approximately Rs98 billion ($1 billion).

“Thus, with improved profitability, there is an expectation that the cement companies will retire their loan earlier and pay decent dividends,” according to the report.

The local cement demand would increase to 25.50 million tons in FY13 against 24 million tons in FY12. However, exports would remain around eight million tons lower than the last year level of 8.5 million tons due to surplus capacity in the Middle East.

Though Pakistani stock market posted a gain of 49 percent (38 percent in dollar terms) in 2012, the trend of equity public offerings at the Karachi bourse remained depressed with the issuance of only three initial public offerings (IPOs).

“This low level of listing is seen after a gap of six years, while it also compares unfavourably with the last 10 years average of seven a year,” said an analyst at Topline Research.

A small amount of Rs500 million was raised in 2012. Two companies that offered the IPOs were oversubscribed that included TPL Trackker and Aisha Steel. Next Capital that was related to financial service received comparatively low response.

TPL Trackker was technology-related, while Aisha Steels was from industrial concerns. TPL public offer was over subscribed by 1.2 times, whereas Aisha Steel was oversubscribed by significant 2.7 times.

Khurram Shahzad, head of research at Arif Habib Ltd, said the capital gains tax has affected the volumes in the stock market, which were not encouraging for the companies to issue new IPOs. “There were several issues, including documentation and becoming accountable to the board and stakeholders and there was no incentive on tax for the companies,” he said.

Now the Securities and Exchange Commission of Pakistan (SECP) was taking positive steps and volumes were raised that would invite more IPOs in 2013, he said, adding that the market environment is improving through corporatisation.

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Fund’s mission may visit

ISLAMABAD: The Post Programme Monitoring mission of the International Monetary Fund led by Jeffry Franks is scheduled to visit Islamabad on January 8, 2013 to scrutinise the Pakistan’s ability of loan repayment, it is learnt.

The mission will hold talks with the Federal Minister for Finance Dr Abdul Hafeez Sheikh from January 8 to 10, 2013, said the sources.

However, Advisor to Finance Division Rana Assad Amin, who is also official spokesman of the ministry, on Monday expressed his ignorance about the schedule of the upcoming IMF’s mission. —Mehtab Haider

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Energy crisis crippling economy

KARACHI: An endemic energy crisis, blamed on years of mismanagement in Pakistan, is crippling the economy and making the lives of millions miserable.

But with political posturing becoming more acute as the weak coalition stutters towards general elections, there is no quick end in sight.

Pakistan’s demand for natural gas and other forms of energy is outstripping supply. At one point, the gap between supply and demand hit 7,500MW or nearly 40 percent of national demand in the outgoing year 2012. This ignited protests and riots all over the country, particularly in Punjab.

According to analysts, under the present government, the power sector is at the top of the list of hurdles crippling industries.

In a letter to the Ministries of Water and Petroleum, the Ministry of Textiles noted that the textile industry suffered Rs200 billion annual losses since the last four years and recommended that the industry should be the priority for gas allocation.

Haroon Agar, president of Karachi Chamber of Commerce and Industry (KCCI), said that the overall business in 2012 contracted by around 25 percent primarily due to energy crisis coupled with law and order issues.

Advisor to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain has categorically said that there is not enough gas to meet demand. According to Hussain, the country’s two largest natural gas fields are expected to run dry by 2022.

However, on the eve of new year, Hussain issued a purely political statement praising the present government’s energy policies that would bring a significant change in the days to come.

Hussain highlighted the government’s consistent efforts in streamlining an enabling and investor-friendly regulatory and fiscal framework and working environment for the oil and gas sector.

“As evident by our recent initiatives, which include the 2012 petroleum and tight gas policies and the road show held to draw foreign investment, the government is determined to transform the oil and gas industry into a fully integrated energy enterprise, using the best available technology,” he said.

The industry people blame the delayed petroleum policy for the prevalent energy crisis and depleting hydrocarbon reserves.

A senior official of a state-owned petroleum company said that the exploration process slowed down due to the delayed policy.

“The auction of new exploration blocs, wellhead gas prices; everything is defined in this policy,” he said. “Had there been timely announcement of policies in the past decade, the situation could have been much better.”

On top of everything, the inter-corporate circular debt remained beyond the government’s control.

Several private power producers had to halt or slash their production because the state-run power purchasing company had not paid them. This is because the biggest consumers (especially provincial and federal governments) had not paid their electricity bills. The bills that had been paid was not enough to cover the generation cost.

In view of natural gas, the demand- supply gap hovered around 2.0 billion cubic feet per day.

Former President Pervez Musharraf’s government began promoting the use of CNG in private vehicles nearly a decade ago. The idea was to reduce the money spent by the government on buying international oil and instead rely on Pakistan’s domestic natural gas reserves.

Today, the use of natural gas in vehicles has become the biggest issue as the government wants to stop CNG, while CNG filling stations are concerned about investment worth billions of dollars that might drown.

There are over 3,500 CNG filling stations in the country and about 3.5 million vehicles have been converted to gas. The issue is still unresolved.

The Planning Commission says that power cuts shaved three to four percent of GDP, with industry bearing the brunt.

According to experts, there is no quick solution in sight as major projects, such as the $12 billion Diamer-Bhasha dam, which is expected to generate 4,500MW, will not come online for another five or six years.

The rivers and valleys of the mountainous north may offer more than 50,000MW of untapped hydroelectric potential, but the power generated could be unreliable and not guarantee year-round supply.

Coal reserves have been found in the Thar desert but the quality is uncertain and international donors are unwilling to invest in such an environmentally-damaging form of energy.

The government is keen to develop nuclear power as it tries to wean itself off expensive imported hydrocarbons.

The country spends 7.5 percent of GDP on buying fuel, according to the Planning Commission.

There are currently three nuclear plants generating a total of 740MW of power and there are plans to expand this to 8,800MW, but only by 2030.

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KSE closes on 16,905.33 points on institutional profit-taking

KARACHI: The Karachi Stock Exchange’s (KSE) benchmark 100-index crossed the psychological level of 1,7000 points in the intra trading session on Monday, said dealers. However, the index could not stay above the level and closed at 16,905.33 points with a decline of 37.86 points against the last session on institutional profit-taking, dealers said.

“Stocks closed lower on institutional profit-taking after the index crossed the historical high of 17,000 level,” said Ahsan Mehanti, analyst at Arif Habib Corp. “Higher global commodities led to positive sentiments in the trading session amid concerns for rising political uncertainty after the political leaders call for long march on January 14.”

Lower CPI inflation expectations for December 2012, the release of $688 million under the US Coalition Support Fund and positive fertiliser off-take data for FFC and FFBL affected sentiments. “Falling banking spreads and global uncertainty over the US fiscal cliff approval affected foreign inflows at the KSE,” said Mehanti.

The KSE-100 index fell by 37.86 points or 0.22 percent to 16,905.33 points against 16,943.19 points recorded in the last session.

The index, at one time, reached a high level of 17,032.05 points during intraday session but could not sustain it, while the low level of the day was recorded at 16,889.98 points. The KSE-30 index declined by 31.56 points or 0.23 percent to 13,764.00 points in the session.

Contrary to the index, turnover and value both increased in the market. The turnover improved by 23 million shares to 177.67 million shares, from 154.45 million shares, whereas the value increased to Rs4.43 billion against Rs3.65 billion recorded in the last session.

Hasnain Asghar Ali, COO of Escorts Capital, said that off-loading at the landmark level initiated in exploration and production stocks, mainly POL, pulled the index down from yet another historic level.

“Although fresh inflows from institutional quarters in frontline stocks did keep the benchmark away from an otherwise extensive decline, negativity and the absence of follow-up support clipped the gains in other frontline stocks,” he said. “Thus, leading to a negative close for the benchmark on the last session of 2012.”

Profit-taking and the absence of follow-up support on strength in frontline stocks, which disallowed the benchmark to close the year at 17,000 points may therefore not disturb the overall sentiment, he added.

“Nevertheless, with the presence of value in various frontline and low-tier stocks due to a paradigm shift in policies and materialisation of various international commitments, local equities are likely to invite fresh funds in frontline stocks on consistent growth and payouts,” he said.

Samar Iqbal, an equity dealer at Topline Securities (Pvt) Ltd, said that athough the market crossed 17,000 points for the first time, it closed below the psychological level. “The Bank of Punjab remained in the limelight after the news of recovery of funds. Volumes also showed some sign of improvement as the year end factor is fading out. All in all, the market gained 49 percent in the calendar year 2012 because of substantial decrease in interest rate,” she said.

The highest increase was recorded in the shares of Unilever Food, which increased by Rs100.00 to Rs4,300.00 per share, followed by Colgate Palmolive, which rose by Rs30.55 to Rs1,500.00 per share. A major decline was noted in the shares of Unilever Pak, which fell by Rs400.00 to Rs10,100.00 per share, followed by Nestle Pakistan Ltd. that declined by Rs166.67 to Rs4,733.33 per share. The stocks that recorded significant turnover included Byco Petroleum,the Bank of Punjab, PTCL, Maple Leaf Cement and NIB Bank Ltd. Byco Petroleum was the volume leader with 16.31 million shares with an increase of 53 paisas to Rs14.45 per share, followed by the Bank Of Punjab with 12.53 million shares and an increase of Rs1.00 to Rs10.70 per share.

Shares’ turnover in the futures market fell to 6.86 million shares from 28.24 million shares traded in the previous session. Of a total of 350 companies’ stocks traded, 141 advanced, 184 declined and 25 remained unchanged.

Unilever Food Rs100.00

Closing Rs4,300.00

Colgate Pal Rs30.55

Closing Rs1,500.00

Indus Dyeing Rs27.45

Closing Rs625.00

Unilever Pak Rs400.00

Closing Rs10,100.00

Nestle Pak Rs166.67

Closing Rs4,733.33

Bhanero Tex Rs12.99

Closing Rs257.01

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No MFN status to India

KARACHI: Year 2012 has ended with Pakistan’s failure to grant the most favoured nation (MFN) status to India and dismantling of the negative list for strengthening trade with its neighbouring country, which was pledged earlier in the year in commerce secretaries-level talks for approving both the key issues by December 31, 2012.

However, the positive outcome of talks remained intact in 2013 as Commerce Minister Makhdoom Amin Fahim on December 29 said that the decision was deferred in consultation with the Indian commerce minister as some Pakistani manufacturing sectors have showed reservations. The minister without giving new date said that it would be decided soon.

Recently, the Indian side had made it clear that Pakistan should honour its commitments as the same was crucial for future course of action. “One deadline for removal of restrictions on trade through land route is passed, another deadline to dismantle the negative list is coming,” said Sharat Sabharwal, Indian high commissioner, was quoted as saying in a statement issued by the Karachi Chamber of Commerce and Industry.

On the condition of elimination of negative list and granting MFN status, India agreed to bring down its South Asian Free Trade Agreement’s (Safta) Sensitive List to 100 tariff lines at six-digit level by April 2013.

However during the year, key progress was made towards strengthening the trade relations between the two countries as two rounds of talks were held and three agreements were signed in September 2012 for cooperation in customs, redressal of trade grievances and conforming to the quality standards to further normalise economic relations.

Most recently, in December 2012, visa accord was signed between the two neighbouring countries during Rehman Malik, interior minister’s visit to India. Both the countries have agreed to make operational the liberalised visa agreement, which was signed in September 2012.

Indian Commerce Minister Anand Sharma visited Pakistan in February 2012 to strengthen bilateral trade. Sharma’s visit was to reciprocate visit of Makhdoom Amin Faheem, who visited India in September 2011.

The liberalised trade regime between the two countries has been considered as key to enhancing trade volume.

Experts said that the trade volume can be increased up to $10 billion in the next two to three years from the existing level of $2 billion.

Some of the major progress made during the year in talks, which included: the bilateral meetings and discussions of the trade and commerce ministers of the two countries (September 2011, February 2012 and April 2012) provided a strong political impetus to enhanced economic engagement.

Following the visit of Indian Commerce Minister Anand Sharma to Pakistan in February 2012, Pakistan notified its negative list on March 20, 2012.

Commerce ministers of India and Pakistan, as well as the chief ministers of Punjab on either side of the border had jointly participated in the inauguration ceremony of the new integrated check post (ICP) at Attari in April 2012.

In September 2012, commerce secretaries of the two countries agreed on the need for more trade traffic to be carried through Railways.

During the year on exploring the possibilities of opening new land routes for trade, Pakistan constituted a working group on Munabhao-Khokhrapar. India had already constituted the working group.

Both the sides signed the new liberalised bilateral visa regime in September 2012.

India allowed investment from Pakistan in August 2012.

In August 2012, India reduced its Safta sensitive list by 30 percent from 878 tariff lines to 614 tariff lines.

In September 2012, India agreed on the condition Pakistan’s approval of MFN status to India by December 2012. India would thereafter bring down its SAFTA Sensitive List to 100 tariff lines at six-digit level by April 2013.

During the year, an Indian company Bhel made an offer to cooperate with the Pakistani side in setting up 500 to 2,000MW capacity in coal / hydro or gas power plants, as per their requirements. India also made an offer to meet the requirements of Pakistan Railways for up to 100 locomotives.

An agreement was reached for forming a joint working group that would work out more liberalised regime of reciprocal bilateral rights for commercial flights, to ensure economic viability of this air route.

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