AFTER a full year of criticism that while it had stabilised the economy it had offered no vision for reform, the government is finally moving.
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government → stabilise → reform
A string of recent announcements makes the reform path clearer.
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path → make → announcements
Refineries are being asked to upgrade their operations in return for concessions granted in the Brownfield Refinery Upgradation Policy.
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Refineries → ask → Policy
A number of power distribution companies are being prepared for privatisation, and the ministry has announced the beginning of power wheeling, an important reform stuck in limbo since 2017 and an essential plank in any effort to reform power pricing.
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ministry → prepare → pricing
The finance ministry is helping arrange resources for the refineries and the newly privatised PIA, as well as moving along the commitments for the Reko Diq project.
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ministry → help → project
A meeting between the finance minister and officials from the US Exim Bank was wrongly interpreted by many as an effort by the government to borrow on behalf of the newly privatised PIA for aircraft procurement.
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meeting → interpret → procurement
It turned out to be nothing of the sort.
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It → turn → sort
Meanwhile, March saw a spectrum auction, setting the stage for the rollout of 5G telecommunications in Pakistan; unlike the last auction in 2021, which saw a lacklustre response, three large telecoms participated and picked up spectrum at a price tag of $500 million.
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telecoms → see → million
So things are finally beginning to move on the structural front.
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things → begin → front
Obviously, it is too early to call the results, but if the envisioned changes behind these actions bear fruit, reform momentum can certainly start to build.
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momentum → call → fruit
In a recent interaction with journalists and industry leaders, the petroleum minister allowed himself to express some annoyance that Pakistan’s refineries can only handle “the sweetest grades of crude”.
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refineries → allow → crude
This means they are using the most basic technology in their sector.
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they → mean → sector
His point was to underline the importance of the upgradation policy, and he emphasised that after the upgrades, Pakistan could also become an exporter of refined products.
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Pakistan → underline → products
If the new rules and policy succeed in getting the refiners to do what they have not done in the past 20 years, that will be a big, positive step.
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that → succeed → years
But of the four refineries that have submitted upgradation plans, only one has the books to bear the cost.
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one → submit → cost
The other three — National Refinery, Cynergico, and Pakistan Refinery Ltd — will struggle to raise the funds, given their books.
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three → struggle → books
Between the four, upgrades worth $4.2 billion have been announced.
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upgrades → announce → four
ARL’s plan is worth $600m and comes to around 1.5 times its (real) equity, which makes the plan realistic.
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plan → come → equity
For the others, the figures are seven to 25 times their (real) equity, which leaves one wondering about their financing plans.
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which → leave → plans
ARL could potentially put up 30 per cent of its equity share for the project from its own cash holdings, and the remainder would be 2.9 times its EBITDA, which is manageable.
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which → put → holdings
It might also need to support NRL’s financing since it owns a 25pc stake in the latter.
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it → need → latter
But the other refiners will need support from multilateral lenders or an Exim bank to arrange resources for their plans.
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refiners → need → plans
This was one reason the finance minister met officials from the US Exim Bank: to help arrange the resources the refiners, PIA, and the Reko Diq project will require.
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refiners → meet → resources
As of now, there is no reason to believe that this will create any public liabilities for the country.
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this → be → country
The refineries have been given the option to sign up for a ‘Refinery Upgradation Account’ ratified by the cabinet in August.
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refineries → give → August
The fund has withdrawal rules, including a requirement that projects be completed within five years, with incentives for early completion, penalties for late completion, and sales tax exemption for upgradation equipment.
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projects → have → equipment
The rules are meant to prevent a repeat of the alleged misuse of the so-called deemed duty in the Musharraf years — when refiners were given an incentive to build stocks and they allegedly took the incentive but did not build any stock.
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they → mean → stock
That episode was documented in the Justice Rana Bhagwandas Judicial Commission report of 2009.
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episode → document → 2009
This time, the funds raised from the incentives will be maintained in an account operated by the ministry, and the refiners will be able to withdraw only after showing compliance with the terms of use of this fund.
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refiners → raise → fund
If the new rules and policy succeed in getting the refiners to do what they have not done in the past 20 years, that will be a big, positive step.
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that → succeed → years
But much hinges on whether they can raise the financing, given the scale of the projects they have announced.
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they → hinge → projects
Likewise, the telcos stepped forward to participate in the 5G spectrum auction after the last auction saw lukewarm participation in 2021.
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auction → step → 2021
Industry’s demand was that they be allowed to pay in rupees, at an exchange rate fixed at the time of the auction, and to stretch their payments over a longer period of time at Kibor plus 3pc.
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they → allow → 3pc
These concessions were granted.
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concessions → grant → ?
In return, they must introduce 5G in Islamabad first, then expand to 10 cities nationwide by 2030, and increase minimum speeds from 20mbps on 4G to 50mbps on 5G.
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they → introduce → 5G.
In addition, some telcos have announced investment plans to expand their business base in Pakistan, with Jazz leading the pack through a $1bn investment plan over the next three years.
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Jazz → announce → years
These are significant steps, including the one we have not been able to discuss — the introduction of wheeling in the power sector.
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we → include → sector
If they go through as envisaged, the impact will be manifest, with greater resilience in our energy supply chain against international shocks, faster communications, and more flexibility in power-provisioning arrangements.
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impact → go → arrangements
Let’s hope for the best, but remain vigilant about the pitfalls as these plans move towards implementation
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plans → hope → implementation
The Aporia
