NEPRA Tariff Rise, Wheat Allocation, Monsoon Flooding, Azeri LNG import, POL Dealers Margin, Russia Air Attacks & Oil Prices.

TOPLINE

• NEPRA has approved an increase in the basic electricity tariff by Rs 7.50 per unit from July 1, 2023, across Pakistan. This decision has been criticized severely by the textile industry, which is already facing chronic issues.
• The ECC of the Cabinet approved the allocation of wheat among recipients for the year 2023-24, with 50% sourced locally and 50% imported.
• The NDMA has issued warnings for flash and urban floods due to the ongoing monsoon rains for next two weeks.
• The agreement between Pakistan and Azerbaijan, allows for the import of one cargo of LNG per month at concessional rates with flexible terms and credit lines for 30 days after the delivery of each cargo.
• The government agreed to increase the margin for petroleum dealers by Rs 1.64 per liter to prevent a threatened strike.
• Russia conducted a drone attack on Monday, destroying Ukrainian grain warehouses along the Danube River, which serves as a crucial export route for Kyiv. Oil prices jumped over 2% to a three-month high on Monday, driven by tightening supply, rising US gasoline demand, hopes for Chinese stimulus measures, the Russian air strike and technical buying. Malaysian palm oil futures rose to the highest closing price of more than four months.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• ECC Approves 2023-24 Wheat Allocation: The Economic Coordination Committee (ECC) of the Cabinet approved the allocation of wheat among recipients for the year 2023-24, with 50% sourced locally and 50% imported, based on the weighted average price of the stock. The ECC also directed recipient agencies/provinces/areas to pay the full price of wheat and incidental charges of PASSCO without any financial liability on the federal government. Additionally, provincial governments were instructed to clear pending liabilities of Rs 149 billion to PASSCO before procuring wheat for the current year. Furthermore, the ECC allocated Rs 47 billion for the execution of development schemes under the SDGs Achievement Program (SAP). [BR]
• Unusual Surge in Egg Prices Raises Concerns: Farm egg prices in retail markets breached Rs 260 per dozen for the first time last week, with some urban markets nearing Rs 300. This increase is unusual for summer months when egg demand usually weakens. The rise in poultry product prices has outpaced yearly food inflation since the ban on importing genetically modified soybeans took effect in early 2023. [BR]
• Sindh Food Authority Recruitment Irregularities: The recruitment process initiated by the Sindh Food Authority (SFA) has been marred by irregularities, as the authority began hiring without having the necessary rules and regulations formulated under the Sindh Food Authority Act 2016. The department advertised 70 posts without waiting for the approval of the provincial cabinet for the rules and regulations draft. Applicants are required to pass a test organized by the IBA-Sukkur's testing service, which has been criticized by graduates as a deliberate attempt to deprive Karachi-based youth of public sector employment opportunities. [Dawn]
• Textile Industry Protests Energy Price Surge: The value-added textile industry has rejected the frequent increase in electricity and gas prices, particularly the significant jump in electricity base rates up to Rs 7.50 per unit. The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) expressed concerns that this hike in tariffs will make Pakistani products uncompetitive in the international market and could have detrimental effects on the country's garment industry. [BR]

AGRI-INPUTS, WEATHER, WATER & POWER

• Heavy Rains for Next Two Weeks: The NDMA has issued warnings for flash floods and urban floods due to the ongoing monsoon rains. The PMD predicts that the current spell of heavy rains is expected to continue for the next two weeks, from July 25 to August 6. Monsoon currents from the Bay of Bengal and the Arabian Sea are affecting the country, and a fresh westerly wave is also anticipated to enter the upper parts of Pakistan from July 26 until July 30. [BR] [Dawn] [ET]
• Concerns Over Pakistan-Russia Oil Supply Evaluation: Pakistan's plan to import Russian crude oil through a G2G mechanism is facing difficulties as Moscow is unhappy with the delay in setting up a Special Purpose Vehicle (SPV) to handle payments and shipments, a necessary step to bypass U.S. sanctions on Russia. During a recent visit by a Russian delegation to Karachi to discuss the quality and pricing of Ural grade crude oil, they expressed dissatisfaction with Islamabad's progress in creating the SPV. Additionally, Pakistan did not receive any special discount on the crude oil, and concerns were raised about the evaluation and commercial analysis for the proposed 100,000 tons per month. [The News]
• Azerbaijan-Pakistan LNG Framework Deal Signed: Pakistan has taken a significant step towards meeting its energy requirements by signing a framework agreement with Azerbaijan to procure LNG (liquefied natural gas) on flexible terms. The agreement between Pakistan LNG Limited and the State Oil Company of the Azerbaijan Republic (SOCAR), allows for the import of one cargo of LNG per month at concessional rates with flexible terms and credit lines for 30 days after the delivery of each cargo, offering a boost to Pakistan's energy needs following its import of Russian crude oil. [BR]
• Unutilized LNG Capacity Auction for Industrial Users: The government of Pakistan is considering allowing Pakistan LNG Limited (PLL) and Sui Southern Gas Company (SSGC) to auction unutilized capacity of LNG to industrial consumers for a specific period and quota to be determined by the Petroleum Division. Presently, Terminal-1, operated by Engro Elengy Terminal Private Limited (EETPL), is fully utilized, while Terminal-2, operated by Pakistan Gas Port Consortium Limited (PGPCL), has some unutilized capacity, which could be offered to private parties through this arrangement. [BR]
• Criticism Arises as NEPRA Approves Tariff Increase: The National Electric Power Regulatory Authority (NEPRA) has approved an increase in the basic electricity tariff by Rs 7.50 per unit from July 1, 2023, across Pakistan. The NEPRA Chairman mentioned that political decisions are being made in the election year to minimize the burden on 68% of protected consumers. During the public hearing, NEPRA was criticized for seemingly complying with government decisions blindly. The decision faced opposition from various groups, including APTMA and consumer representatives who expressed concerns about increased theft of electricity due to the tariff hike. [BR] [Dawn]
• Power Tariff Hike Excludes Low-Consumption: PM Sharif announced that the recent power tariff increase will not affect consumers using up to 200 units per month. The increase was approved by the federal cabinet and will apply to all power distribution companies and K-Electric, with a retrospective effect from July 1. NEPRA had raised the national average tariff by around Rs 5 per unit earlier this month to support loss-making power distribution companies. [Dawn] [Dawn]
• Pakistan's Petroleum Imports Surpass Estimates: Pakistan imported petroleum products worth $1.182 billion on deferred payment from Saudi Arabia during the fiscal year 2022-23, exceeding the budgeted estimates of $800 million. The deferred payment arrangement was extended for another year from March 2023 to February 2024, allowing Pakistan to continue availing the facility. [BR]
• UAE-Pakistan Deal for Karachi Port Terminal Progresses: The government approved a draft framework agreement to transfer the Bulk and General Cargo Terminal at East Wharf Karachi Port to Abu Dhabi Ports through negotiations on a G2G basis. The decision was made without competitive bidding or price discovery. The Cabinet Committee on Intergovernmental Commercial Transactions, gave its approval, and the agreement will be ratified by the Federal Cabinet. The Karachi Port consists of three wharves, and the Clean Bulk Cargo Terminal (CBCT) was handed over to Karachi Port Trust in 2016 after being built with a loan from the World Bank. [Dawn] [ET] [The News]
• Fortnightly Installments for Dealers' Margin Hike: The federal government has agreed to increase the margin for petroleum dealers by Rs 1.64 per liter to prevent a threatened strike. During a marathon meeting with the Pakistan Petroleum Dealers Association (PPDA) representatives, it was decided to implement the increase in four fortnightly installments of 41 paise per liter each. Dealers agreed to the arrangement to avoid going on strike. [Dawn] [ET]
• Lower Priced Fuel Oil Export Deal by PARCO: Vitol Group, the world's largest independent oil trader, has secured a contract to sell 50,000 metric tonnes of high-sulfur fuel oil from Pak Arab Refinery Ltd. (PARCO) in the international market. The deal is expected to yield a lower price than the domestic market rate, with the export price reported to be around Rs 140,000 per metric tonne, compared to the local price of around Rs 160,000 per metric tonne. [The News]
• Guddu Power Plant Probe: The Federal Investigation Agency (FIA) will investigate $32 million payments made to M/s General Electric (GE) for the replacement of damaged machinery at the 747 MW Guddu Power Plant GT-14. The decision was made during a meeting of the Senate Standing Committee on Power, chaired by Senator Saifullah Abro. The Committee found the acting CEO of GHCL unsatisfactory in their response and directed the Power Division to involve the FIA in the matter. [BR]

AGRI UPDATES & PAKISTAN POLICY

• Rupee Depreciates for Seventh Straight Session: The Pakistani rupee sustained losses against the US dollar for the seventh consecutive session, depreciating by 0.39% on Monday. The currency settled at 287.92, a decrease of Rs 1.11, according to the SBP. Over the past seven trading sessions, the rupee has lost nearly 4% or Rs 11.46 against the US dollar. The depreciation is attributed to fading euphoria over the IMF deal, and the gap between interbank and open market rates has reduced, becoming a crucial indicator for evaluating Pakistan's IMF Stand-By Arrangement (SBA) program. [BR] [Dawn]
• Army Chief Inaugurates Agricultural Farm: Army Chief General Asim inaugurated the Khanewal Model Agricultural Farm to strengthen the agricultural sector and promote prosperity. [ET]
• FBR Issues Circular Amending Sales Tax Act: The FBR has issued Circular No. 02 of 2023, amending the Sales Tax Act 1990, ICT (Tax on Services) Ordinance 2001, and Federal Excise Act 2005 through the Finance Act, 2023. As a result, sales tax will now be charged on goods such as red chilies, ginger, turmeric, yogurt, butter, desi ghee, and cheese, even if they are sold under brand names or trademarks. The amendments remove the distinction between retail and bulk packaging for sales tax purposes and eliminate ambiguity in taxation of these goods. [BR]
• Contempt of Majlis-e-Shoora Bill Passes in Senate: The Senate passed a bill proposing a six-month punishment for contempt of parliament or its committees. During the session, heated debate between PPP lawmakers and a Jamaat-i-Islami senator almost led to a physical altercation over the recent Karachi mayoral elections. The 'Contempt of Majlis-e-Shoora (Parliament) Bill' was introduced through a supplementary agenda and passed through a voice vote without referral to the standing committee. [Dawn]
• PPP & PTI Oppose Ishaq Dar's Candidacy: The PML-N initially hinted at Ishaq Dar as the most suitable candidate for caretaker prime minister but seems to be backpedaling after facing opposition from both its ally PPP and the PTI. The PPP called the reports false, and the PTI referred to Dar as a "big joke." [Dawn]
• ECP Directs Islamabad Police to Arrest Imran Khan: The Election Commission of Pakistan (ECP) has directed the Islamabad Police to arrest Chairman Pakistan Tehreek-e-Insaf (PTI) and former Prime Minister Imran Khan and present him before the electoral entity on Tuesday in connection with contempt proceedings against him. Despite receiving multiple notices and bailable warrants, Imran Khan failed to appear before the ECP, leading to the issuance of a non-bailable arrest warrant. [BR] [Dawn]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Kyiv's Vital Grain Route Targeted in Russian Air Campaign: Russia conducted a drone attack on Monday, destroying Ukrainian grain warehouses along the Danube River, which serves as a crucial export route for Kyiv. This attack comes as part of an ongoing air campaign launched by Moscow after withdrawing from the Black Sea grain deal. Last week, Russian attacks targeted mostly the seaports of Odessa, but the latest strikes hit infrastructure along the Danube, which has become increasingly important for Ukrainian grain transit since the collapse of the Black Sea grain deal. [Dawn] [ET] [The Guardian] [Reuters] [Economic Times]
• Oil Prices Surge to Three-Month High: Oil prices jumped over 2% to a three-month high on Monday, driven by tightening supply, rising US gasoline demand, hopes for Chinese stimulus measures, and technical buying. Market uncertainty surrounding Russia's bombing of Ukraine's grain export facilities and apparent missile launches by North Korea also contributed to the price increase. Despite expectations of more interest rate hikes from US and European central banks, oil prices remained strong. Brent futures rose $1.82, or 2.2%, to $82.89 a barrel by 11:56 a.m. EDT (1556 GMT), while US West Texas Intermediate (WTI) crude rose $1.96, or 2.5%, to $79.03. [BR] [Reuters] [KT]
• Palm Oil Futures Soar Amid Ukraine Port Attack: Malaysian palm oil futures rose significantly on Monday, with the highest closing price of more than four months, over the news of Ukraine port being attacked by Russia. The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange rose 133 ringgit, or 3.30%, to 4,168 ringgit ($912.04) a metric ton on its closing price. [BR]
• China’s Addiction to Coal: While pledging to reduce carbon emissions, the country is greatly increasing its use of fossil fuel to generate electricity. China has an answer to the heat waves now affecting much of the Northern Hemisphere: burn more coal to maintain a stable electricity supply for air-conditioning. Even before this year, China was emitting almost a third of all energy-related greenhouse gases — more than the United States, Europe and Japan combined. Last month, China generated 14 percent more electricity from coal, its dominant fuel source, than it did in June 2022. [NYT]
• Algeria Battles Devastating Wildfires: Wildfires in Algeria have resulted in the deaths of more than 30 people, including 10 soldiers who were fighting the flames. The fires, fueled by fierce winds and extreme heat with temperatures reaching 48 degrees Celsius (118 Fahrenheit), have affected 16 provinces. The blazes have led to the evacuation of hundreds of people from their homes in the country's Mediterranean coastal region, particularly in the provinces of Bejaia, Bouira, and Jijel. [Al Jazeera] [Dawn] [The Guardian] [AN] [Al Arabiya] [The News] [The Nation] [The National] [France 24] [PO] [BBC]
• UN Global Food Crisis Summit: A three-day United Nations summit commenced in Rome to address the global food system crisis. With millions suffering from hunger, two billion being overweight or obese, and extensive food waste, the summit aims to find solutions and create a more sustainable and equitable food system. [BR] [Dawn] [AP] [DS] [UN News]
• Concerns Rise Over Threats to Israeli Democracy: Israel's hard-right government approved a key clause of its controversial judicial reform package in parliament, limiting the Supreme Court's powers to overturn government decisions deemed "unreasonable." The move sparked mass protests and concerns from foreign allies about potential threats to Israel's liberal democracy. Prime Minister Benjamin Netanyahu and his coalition allies supported the bill with 64 out of 120. [BR] [Dawn] [ET] [Time] [Vox] [The Guardian] [ABC] [Mint] [Haaretz]
• Twitter is now ‘X’: Twitter has undergone a major rebranding, with owner Elon Musk changing its iconic bird logo to an "X." The website remains live, and the app version's branding hasn't changed. Musk shared a video of the "X" logo and later tweeted an image of the new branding. [Dawn] [CNBC] [NBC] [The Independent]
• Water Shortages & Heat in Iran: Water shortages have left people in Iran with shrinking options, as temperatures spike and growing poverty makes air-conditioning unaffordable. A combination of widening poverty and rising heat is crushing much of southern Iran, where sprawling desert, joined with the humidity of the nearby Persian Gulf, is prone to heat waves and droughts. [NYT]

PAKISTAN - REMAINDERS

• Three airports generate Rs 130 billion in three years. [ET]
• Pakistan Ranks Third Globally for Internet Restrictions. [Dawn] [AN] [247 News] [ProPakistani]
• Water Shortage in Karachi to Continue Until K-IV Completion, Says Sindh Assembly. [BR] [Dawn] [ET]
• Opinion: Pakistan’s economy – looking beyond the crisis - “Will SBA help solve any of our problems? It will certainly help, but if and only if, it is used to address some of the key issues that underpin Pakistan’s abysmal economic performance – GDP growth rate of only 0.29 %; rising inflation; limited employment opportunities, especially for the poor; and stagnant exports.” - By Daud Khan & Mahmood Nawaz Shah [ET]
• Opinion: Monsoon anxiety - “The onset of the monsoons has triggered a wave of anxiety as early rains have resulted in a number of casualties. The National Disaster Management Authority has already reported 133 deaths countrywide. Rain spells that began in the last week of June continue to lash different cities. Strong showers have inundated roads and underpasses in Lahore and triggered alarm in Rawalpindi as the Leh Nullah crossed the flood threshold.” - By Naseer Memon [Dawn]