ECC okays Rs50bn for PSO to stay afloat.

ISLAMABAD -- Amid looming international default threat on national fuel supplier - Pakistan State Oil (PSO) - owing to a record Rs775 billion receivables, the government on Tuesday approved extending sovereign guarantee for Rs50bn commercial borrowing and fixed Rs8,500 per 40kg minimum intervention price for raw cotton known as phutti to revive a faltering cash crop.

The decisions were taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet, presided over by Finance Minister Ishaq Dar, which also extended the deadline for export of sugar by 15 days and granted a supplementary grant of Rs10bn to the National Disaster Management Authority (NDMA) to support humanitarian activities in flood affected Turkiye and Syria.

The meeting was informed Pakistan's cotton production had dropped gradually from a peak of 14.1 million bales in 2004-05 to 7 million bales in 2020-21 as low-profit margins compelled farmers to switch to other crops like rice, maize and sugarcane. The crop output improved to 9.45 million bales in 2021-22 as the government supported through intervention price but dropped again to 4.75 million bales in 2022-23 against a target of 9m bales owing to devastating floods.

The Ministry of National Food Security and Research (MNFSR), after consultation with cotton growers and the textile industry, advocated that cotton production could be increased to 15 million bales over a short period to meet the industry's requirement, currently met through $6bn imports, provided price intervention policy was supported.

Fixes phutti support price at Rs8,500; extends sugar export deadline

The stakeholders' consensus was reported at an intervention price of Rs8,500 per 40 kg which should be announced ahead of the sowing season, which starts in March to May, to encourage farmers to bring more area under the crop.

The ECC approved the intervention price at Rs8,500 per 40 kg with the expectation to enhance yield and area by 10-15pc which will remain in place until Dec 31. The ECC also directed MNFSR to constitute Cotton Price Review Committee (CPRC) with a mandate to review market prices and adjust the intervention price accordingly.

PSO bailout

The ECC was informed that PSO was importing 8-9 cargoes of Liquefied Natural Gas (LNG) per month from Qatar and was obligated to clear its international invoices within 15 days. The fuel supplier last week 'conveyed SOS call for funds...