Stocks gain 323 points in two days on foreign buying

KARACHI, April 21: The Karachi stock market witnessed a turnaround with the benchmark KSE-100 index netting a gain of 323 points in two days.

Foreign fund managers who were thought to be on the run, returned to a heavy net buying of $6.3 million stocks on Thursday, with $2.7 million traded in “off-market”.

But the significant feature of trading on Thursday was the scramble for heavyweight oil and gas stock of Oil and Gas Development Company Limited (OGDC).The stock performed the rare feat of hitting its ‘upper circuit’ with a gain of Rs6.31.

All shares at the market are ‘locked’ at the maximum rise or fall of five per cent in value for a day, referred to as ‘circuits’. Due to its significant weightage of 16 points per rupee change in the KSE index, the OGDC share price rise contributed 110 points to the overall index upward spiral of 179 points in the day’s trading.

With more than 70 per cent of the ‘free float’ in OGDC passing into the hands of foreign funds, there has always been a lurking fear of the overwhelming power of a single stock to turn the market direction, either way.

”The resumption of local and foreign buying in OGDC was spurred after almost 30 per cent fall from the peak the preceding month,” said a trader.

Other than that cement, fertiliser and energy scrips also remained in the limelight.

Aqeel Karim Dhedhi (AKD), the major stock broker affirmed that oil and gas exploration and marketing companies had a world of untapped potential.

”Placing the proper people at the top positions in those energy companies can unleash a wave of prosperity, through intense activity in the drilling fields,” he said.

AKD, known to be the incorrigible bull, held high hopes for the $37 billion or Rs3.1 trillion Pakistani main equity market.

Mohammad Sohail, CEO at Topline Securities, said that the rally on Thursday was surely led by a significant contribution by OGDC.

“With more than $8 million in gross buying by overseas investors, the volume in rupee terms also rose”, he said.

Trading value rose to Rs4.8 billion on Thursday, from Rs4 billion worth of equity traded a day earlier. Brokers heaved a sigh of relief as the volume rose to 71 million shares from just about 25 million shares a few days back, which had hit upon their commission.

While the index stood at a stone’s throw from the 12,000 level at 11,923 points at the close of business on Thursday, analysts argued on the market’s ability to sustain the upward drive.

”But the index is not necessarily representative of the market conditions,” said another major stock broker and he pointed out the thin margin between stocks that gained values (141) and those that ended in the red (126) on Thursday.

Trading at only seven times the forward earnings, compared to double digit equity valuations in most emerging markets, the Pakistani stocks were ‘very attractive’, he said.

The KSE had provided return of 13 per cent in the past 12 months, though year-to-date the stocks were down one per cent.

The equities had returned 28 per cent on investment last year, which was thought to be alluring over other avenues such as the bank deposits, National Saving Schemes and commodities.

But several traders pointed out that the flurry of activity at the KSE on Thursday was also in line with a resurgence of investor interest in global stock markets.
Shares on all major bourses, including China, Japan, India and Hong Kong were on the rise.

Gold hits record high

LONDON, April 21: Gold prices rallied to record highs on Thursday for a fifth straight session and silver soared, as the dollar index tumbled for a third day, prompting investors to buy bullion as a currency hedge.

Gold, which jumped above $1,500 an ounce for the first time on Wednesday, once again rose in tandem with riskier assets such as equities on inflation fears.

Spot gold rose 0.5 per cent to $1,505.34 an ounce by 12:21 p.m. (1621 GMT), after hitting a record $1,508.75 an ounce.

US gold futures for June delivery rose $7 an ounce to $1,505.90.

Silver gained 1.6 per cent to $45.93 an ounce. US silver futures trade was active, with volume approaching 150,000 lots, set to be one of the busiest sessions in 2011.

The gold/silver ratio — which shows how much silver an ounce of gold can buy — is set to fall for a ninth consecutive session to below 33, a 28-year low.

“Silver continues to attract huge speculative interest.

Gold also benefits as a hedge against US currency depreciation, as the dollar tumbled for the third straight day as super-low interest rates and the crushing weight of a massive budget deficit pushed the greenback closer to an all-time low against a basket of major currencies.

The euro jumped above $1.46 on Thursday for the first time in 16 months before falling back slightly as investors take on board growing concerns about the US debt outlook.

In late European trade Thursday, the euro was at $1.4581, off a high of $1.4649 earlier and up from $1.4521 in New York late Wednesday.

The dollar fell sharply too to 81.80 yen from 82.54 yen.

The dollar stood at 81.80 yen (82.54) and 0.8824 Swiss francs (0.8882). The pound was at $1.6567 (1.6407).

Reserves rise to $17.38bn

KARACHI, April 21: Foreign exchange reserves rose to $17.38 billion in the week ending on April 16, from $17.31 billion the previous week, a central bank official said on Thursday.

Reserves held by the State Bank of Pakistan eased slightly to $13.91 billion from $13.93 billion a week ago while those held by commercial banks jumped to $3.47 billion from $3.38 billion, said SBP chief spokesman Syed Wasimuddin.

Pakistan’s forex reserves have grown steadily thanks to higher export proceeds as well as record inflow of remittances, hitting an all-time high of $17.95 billion during the week that ended on March 26.

Reserves have since eased slightly on debt repayments.

Remittances from overseas Pakistanis increased by 22.37 per cent to more than $8 billion in the first nine months of the 2010-11 fiscal year (July-June), and in March, a record $1.05 billion was received, according to SBP data.

Foreign exchange reserves were boosted in January by more than $633 million when the United States provided funds.

Met office: hurry with wheat harvesting

ISLAMABAD, April 21: The Pakistan Meteorological Department has advised the farmers of upper Khyber-Pakhtunkhwa and northern areas of the Punjab to complete harvesting and threshing of wheat crop at the earliest due to the chances of light rain in these areas during the remaining period of the current month.

In an advisory, the Met Office stated on Thursday that harvesting of matured wheat crop in time would allow enough time for land preparation and sowing of coming Kharif crops, especially maize and cotton.

According to the data collected and analysed by the National Agro-meteorological Centre of Pakistan Meteorological Department, light to moderate rainfall with thunderstorms and gusty winds were reported from most of the agricultural plains of Kashmir, Gilgit-Baltistan, Khyber Pakhtunkhwa, Punjab, northern and central Balochistan during April 16 to 19 and thus harvesting of the wheat crop was delayed.

It has further been stated in the advisory that the remaining days of April are expected to witness dry weather and clear sky. However, light rain and drizzle may occur at a few places in northern parts of the country including agricultural plains of upper KPK, and northern areas of Punjab.

Taunsa power project to cut loadshedding in Punjab: Shahbaz

LAHORE, April 21: Punjab Chief Minister Shahbaz Sharif has said that the agreement reached with a Chinese company for the Taunsa power project will prove to be a new chapter of foreign investment in Pakistan.

He was addressing a meeting after a visit to Three Gorges Dam, which is the world`s largest hydroelectric power station with a total generating capacity of 18,200MW, according to a handout issued on Thursday.

While recording his impressions in the visitors` book, Mr Sharif described the Three Gorges Dam project as a “gorgeous one” and a tribute to the unshakable commitment, indefatigable efforts and indomitable spirit of the Chinese people. He said the dam was the Eighth Wonder of the world.

Referring to the Taunsa power project, the chief minister said that the project would prove to be a memorable gift for the people of Punjab by the government and the people of China and a shinning example of Pak-China friendship.

He said the Taunsa power project would help reduce load-shedding, transfer hydropower technology to Pakistan, restart industrial activities and generate job opportunities.

He said that Pakistan wanted to benefit from Chinese expertise at the Taunsa barrage and other projects.

Later, leaders of the Chinese Communist Party hosted a reception in honour of the Punjab chief minister and his delegation in Ye Chang, the central city of Hubei province.

Mr Sharif said that the people of China were custodians of an ancient wisdom of China spanning over thousands of years and the Communist Party had played a historic role in using their capabilities.

Mr Sharif said that he and members of his delegation had come to seek cooperation with China in agriculture, livestock, road construction, hydropower, communication and other sectors and they were happy that the leadership of the Communist Party was extending them full encouragement and patronage.

The local leader of Chinese Communist Party, Li Ya Long, said that Punjab chief minister`s visit to China would play an important role in cementing friendly relations between the two countries and mutual contacts would be made more effective and result-oriented in science, technology, culture and other sectors.

He assured the visitors Communist Party`s full cooperation in the development of infrastructure, agriculture, culture, livestock, communication and other sectors in Pakistan.

He described the power generation project at Taunsa barrage as a glorious example of Pak-China friendship.

Import bill of oil, food items up by 22.7pc

ISLAMABAD, April 18: Pakistan`s import bill of oil and eatable products has increased by 22.7 per cent in the first nine months of the current fiscal year, contributing mainly to rising trade deficit of the country, suggests the data of Federal Bureau of Statistics issued on Monday.

As a result, the bill from these two essential commodities reached $12 billion during the July-March period of the current fiscal year against $9.78 billion of the same period last year. This rising trend sends signals of an overwhelming increase in the overall import bill by the end of June 2011.

Rise in the import of furnace oil for producing thermal power to bridge the power shortage and rise of oil price in the international market have contributed to the rise.

According to statistics, the government has projected that the import of furnace oil will reach 8 million ton this year against 6.5 million ton of the last year, indicating a growth of 23 per cent. At the same time, analysts widely agree that oil prices will cross $150 a barrel in 2011 as the global economy continues to improve following the recession in the past few years.

According to the FBS, the oil import bill reached $8.08 billion in the July-March period of the current fiscal year against $7.343 billion over the same period last year, indicating an increase of 10.14 per cent.

Of these, the import of crude oil was up by 27.58 per cent to $3.40 billion during the period under review against $2.665 billion over the corresponding period of the last year. This suggests a rising oil demand in the domestic market because the quantity of crude oil import also witnessed an increase of 30.52 per cent.

On the other side, import of petroleum products reached $4.688 billion in the months of July-March, up by 0.21 per cent from $4.678 billion over the corresponding period of the last year. This high import of petroleum products indicates that domestic refineries were not used fully for refining products to save foreign exchange.

The import of food items witnessed a robust growth of 60.55 per cent to $3.913 billion in July-March period this year against $2.437 billion over the corresponding period.

The food groups emerged second after oil import bill in the current fiscal year to bridge the shortfall recorded in the local production of farm products after the floods destroyed standing crops in August.

Statistics showed that import of palm oil increased by over 48.79 per cent and soyabean oil 719 per cent in the period under review. Massive depreciation of Pakistani rupee also edged up import bill of these non-staple food items.

According to statistics, the import bill of milk products was up by 91.88 per cent and dry fruits up by 7.75 pc owing to high consumption in winter. The import of pulses witnessed an increase of 72.55 per cent during the July-March 2010-11 to bridge the 50 per cent shortage of the pulses production in the country.

The import of tea also increased by 29.13 per cent and spices 57.66 per cent, respectively, both in quantity and value, suggesting high consumption of the products. And sugar import also recorded a growth of 388 per cent during the period under review to meet the rising demand for the whitener in the domestic market.

Saudi Arabia keen to invest in Pakistan

WASHINGTON, April 18: Saudi Arabia is interested in investing in Pakistan`s energy and agriculture sectors, Finance Minister Abdul Hafeez Sheikh said after meeting his counterpart from the oil-rich country.

Dr Shaikh and Saudi Finance Minister Dr Ibrahim Bin Abdulaziz Al -Assaf discussed investment opportunities that Pakistan holds out for Saudi businesses at a meeting on the occasion of semi-annual IMF-World Bank gathering.

“We have very close and longstanding relationship with Saudi Arabia and Ibrahim Al-Assaf is a longtime friend of Pakistan. We explored ways to further expand bilateral economic cooperation,” Hafeez Sheikh said.

He also reaffirmed Islamabad`s policy to facilitate foreign investment in various sectors of the economy including energy as the country seeks to overcome electricity shortages and spur industrial output.

The Pakistani finance minister also discussed economic cooperation with his counterparts from neighbouring Iran and Afghanistan.

Current account shows $99m surplus

The biggest reason for this surplus was the current transfers mainly dominated by overseas Pakistani workers` remittances.

KARACHI: The Current account was surplus at the end of the third quarter of the current fiscal year, strengthening further the economy on the external front.

The State Bank reported on Monday that the country`s current account was $99 million during July-March 2011, mainly on account of higher workers` remittances, improvement in trade of services and a balanced trade deficit despite high oil prices in the international market.

The biggest reason for this surplus was the current transfers mainly dominated by overseas Pakistani workers` remittances.

The record remittances, which were above $8 billion at the end of the third quarter, are being disputed by some former bureaucrats, showing their inability to understand these record remittances.

The remittances played a key role to bring down the current account deficit from minus 9.2 billion in FY-09 to minus 3.9 billion in FY10 and now the country`s external account is surplus with $99 million in nine months.

“Comfortable current accounts position can lead to a strong economic recovery in the financial year 2012 provided the global oil price eases,” said Mohammad Sohail, CEO of Topline Securities.

He said better external position, coupled with government`s fiscal discipline, can help get control over inflationary pressure.

The State Bank reported that the surplus in March was $347 million. During this month, remittances were above one billion dollars.

The report shows that the trade deficit was almost same of the last year despite much higher oil prices.

This was due to higher exports and more accurately higher prices of exportable products.

Some exporters said the country may not benefit the windfall in textile exports that was because of global shortage of cotton production. However, the remittances have taken lead role to dilute the impact of trade deficit and help keep current account at minimum level.

The emerging economies are facing a situation like overflow of foreign investment. While they are planning to get control over soaring foreign investment and taxing it, Pakistan received just about $1 billion, a decline of 28 per cent foreign direct investment (FDI) during 9 months.

“Pakistan has great potential for foreign investment, but it depends on political stability and persistent disturbing law and order situation in most parts of the country,” said Mohammad Imran, an expert on investment strategy.

He said once the FDI picks up pace, the country would be able to maintain a surplus of the current account

Exports of textile, clothing increase

ISLAMABAD, April 18: Pakistan`s textile and clothing exports have gone up by over 30 per cent in the first nine months of the current fiscal year against the corresponding period of last year.

It was due to rising demand for low value-added products and cotton prices in the international market that the exports from the country registered the increase.

In absolute terms, exports proceeds reached $9.880 billion during the period under review from $7.575 billion of the last year`s corresponding period, showed data of the statistics division issued on Monday.

The increase also dragged the share of textile and clothing sector of the country to 55.5 per cent this year from 53.8 per cent against the same period of the last year, reflecting an increase in one sector in overall exports proceeds from the country.

Thus, the overall exports proceeds reached to $17.798 billion during July-March this year from $14.072 billion of the last year.

Rising cotton prices in the international market have driven cotton-based exports from the country. But statistics also showed that import of textile machinery also recorded a growth of 80 per cent during the first nine months.

Textile manufacturers have started importing equipment for enhancing their capacity of production. However, it was not vivid from the figures that what kind of machinery was imported during the period under review.

As a result, the growth was witnessed across the whole value chain of textile and clothing sectors from raw materials to value-added sectors, excluding the tents manufacturing sector. Substantial growth in exports of garments and knitwear, two leading value-added sectors, has also been recorded because of government`s special support and subsidies to the sector.

Contrary to growth in textile and clothing, exports of traditional products or non-textile products were up by 21.87 per cent to $7.918 billion during July-March this year against $6.497 billion over the same period last year.

The growth in non-textile products was driven by a substantial increase in exports of food items, which recorded a growth of 25.55 per cent during the period under review. It was mainly driven by an increase in exports of wheat and meat from the country.

Product-wise details showed that exports of readymade garments increased by 37.75 per cent and knitwear by 32.71 per cent during July-March this year. Exports of bedwear also witnessed a growth of 22.28 per cent during the period under review.

Exports of raw cotton witnessed a growth of 22.41 per cent during the period despite the fact that this year the country was facing a shortfall of over 2 million bales due to floods in August. At the same time, export of cotton yarn was up by 37.21 per cent in July-March and cotton cloth also witnessed a growth of 26.60 per cent and towels 17.25 per cent. However, exports of tents declined by 38.91 per cent.

In traditional products, exports of sports goods have gone up by 8.60 per cent, value-added products of leather 20 per cent, footwear 12.28 per cent, surgical goods and instruments 2.66 per cent.

And the exports of engineering goods were up by 9.5 per cent during the period under review.

Pakistan: Cotton prices ease on hasty-selling

KARACHI, April 18: Trading on the cotton market on Monday resumed on an easy note as some of the ginners were indulged in hasty-selling to clear the backlog of odd lots.

Most of the deals were quality based and from the southern Punjab cotton belt and finalised as higher as Rs12,000 per maund while the odd lots were done at Rs10,700 to 11,800.

They said the ginners, who are holding bulk of the unsold stock of about 180,000 bales mainly in the southern Punjab, seemed to have now decided to sell the inferior lots at prevailing prices and held onto quality lots for another couple of weeks to get higher prices.

“The weakness of the New York futures for the last couple of weeks has apparently weakened their holding power and they could not precisely decide how to react,” they added.

The perception that the New York cotton futures could hold on their best level beyond 200-cent per lb seems to have no relevance to the ground situation after the fall in foreign demand, they added.

They said the new crop from the lower Sindh and the central Punjab was expected to arrive in the market possibly middle of the June or early July as forward deals already signed by some of the spinner also checked speculative rise in the ruling prices.

Official spot rates were, therefore, held unchanged at the weekend level of Rs12,000 per maund but in the ready section prices were quality-based.

The following are some of the deals reported by the Karachi Brokers Forum on Monday evening: 1,400 bales, Rahimyar Khan at Rs12,000, 200 bales at Rs11,800, 200 Khanewal at Rs12,000, 400 bales, Shahdadpur at Rs10,700 and 800 bales, Haroonabad at Rs10,500 to Rs10,700.

IMF: No money for Pakistan

A privilege motion has been moved in the National Assembly against the finance minister for saying that lawmakers are preventing the government from implementing tax reforms.

WASHINGTON: The Pakistani delegation to the International Monetary Fund-World Bank spring meetings is returning home without any understanding on the release of the final instalment of an $11.3 billion loan package.

Pakistan has already received more than $7 billion in five instalments. The 6th tranche, however, remains suspended since May 2010 because of the country’s inability to meet performance benchmarks attached to the standby arrangement.

“There are no indications that the delegation was able to convince the IMF to release the next tranche,” a diplomatic source told Dawn.

“And until the 6th tranche is released, it is highly unlikely that the IMF will hold any negotiations on a future arrangement.”

Islamabad had earlier indicated that it might seek another loan arrangement of about $3.2 billion to meet its financial obligations and to repay earlier debts.

Pakistan has borrowed more than half of its $50 billion external loans from the IMF, the World Bank and the Asian Development Bank.

“But the country’s economic performance is so poor that it is difficult to imagine how they could have convinced the IMF to release the next tranche,” the source said. “This was not a good trip for the Pakistani delegation.”

Pakistan still has about two months to implement at least some of the reforms the IMF recommended to qualify for the 6th instalment and to seek a new package.

Pakistan is expected to send another delegation to Washington next month or in early June for more talks on continued international assistance to rescue its ailing economy.

The IMF’s concerns revolve around a rising inflation, a widening fiscal deficit, exemptions incorporated in the reformed general sales tax and energy subsidies.

During talks in Washington, experts referred to a notification the government of Pakistan issued on April 1, giving exemptions to textiles and leather and sporting goods from the RGST.

The IMF argued that since these were the biggest income generating sectors, giving exemptions to them will further weaken the government’s ability to raise money, particularly when it was reluctant to impose agriculture tax.

Referring to a privilege motion moved in the National Assembly on Monday against the finance minister for saying that Pakistani lawmakers were preventing the government from implementing tax reforms, a diplomatic source said: “These are internal political pressures but they cannot convince donors to give more money unless the Pakistanis take immediate measure to reform their economy.”

The IMF is believed to have warned the Pakistani delegation that if they did not take immediate remedial measures, their deficit may go up to 6 per cent by the end of the current fiscal year.

Experts noted that India also had a high deficit but their growth rate was also between 9-10 per cent compared to Pakistan’s 2 per cent.

Pakistan’s inflation rate, already between 13 to 14 per cent may also go further up. And in the current situation, taking more loans will bring more pressures on the economy, IMF experts warned.

While pointing out that the government cannot afford to continue to subsidise the energy sector, the experts referred to various figures released in Islamabad. According to these statistics, the government was spending Rs46 billion a year on servicing the old circular debt in the energy sector.

This year the government will face another deficit of Rs256 billion because of increase in oil prices. The electricity loss costs the government Rs256 billion a year, which is more than its total expenditure of Rs165 billion.

Experts noted that with population growth rate not slowing down, youth unemployment at almost 50 per cent, less than 5 per cent investment in public sector development and with a 10 per cent tax to GDP ratio, Pakistan could not hope to revive its economy without drastic reforms.

Modern agro-system planned

RAWALPINDI: Food and Agriculture Minister Lt-Gent K.M. Shaikh yesterday announced that the government was appointing a committee to consider introduction of a fixed land tax to replace the present system of land revenue to provide greater incentive for agricultural production.

The recommendations of the high-powered Food and Agriculture Commission for improving the system of cultivation on modern lines so as to achieve maximum yield from the land were announced by the minister yesterday. He was confident that these recommendations, when implemented, would re-orientate the agricultural system.

The nine-man commission, headed by the West Pakistan Governor Malik Amir Mohammad Khan, made detailed study of the problems connected with land production and suggested changes in the system of cultivation.

Most important of these recommendations are the setting up of Agricultural Development Corporations in each province and the introduction of cooperative farming.

In addition, the commission has also recommended the establishment of an Agricultural Scientific Research Council, better irrigation facilities, Price Stabilisation Board, fixed land tax on zonal basis and re-examination of incidence of export duties on agricultural produce.

The major portion of the recommendations has been accepted by the government with modifications, while the rest are under scrutiny at different levels.

General Sheikh told a press conference that the proposed Agricultural Development Corporations which are expected to come into existence from the next financial year, will have two wings — the supply wing and the field wing.

Pakistan: Bumper wheat crop expected

CHAKWAL, April 18: Provincial Minister for Agriculture Malik Ahmad Ali Aulakh on Monday said the Punjab government would achieve 18 million tons wheat procurement target.

“Surplus wheat production is expected this year and we will be able to export it,” the minister told reporters in Kallar Kahar.

He said last year wheat production was not good because of less rain but this year bumper crop was expected. “Though the wheat could not be cultivated on 50,000 acres due to the floods but due to good rains the production would be beyond expectation,” he maintains.

He said that due to flood Punjab Government has suffered the loss of Rs94 billions. “The government is bearing the burden of Rs54 billions due to the rise in salaries,” he says. He vowed to provide bulldozers to the farmers. “The small farmers would be given special subsidy,” he maintains.

Price hike adding to common man’s woes

The prices of kitchen items are escalating with each passing day due to lack of concrete steps by the district administration or provincial government. Talking to this reporter various customers in the local market complained that profiteering and hoarding and uncertain political situation had landed them into this situation.

They said traders and shopkeepers were charging high prices for daily use items in different markets of Attock and its surrounding areas.

They blamed the government quarters concerned for failing to stabilise prices of food items. Even the price control committees, mostly comprising big traders, seem helpless to control the prices.

During a visit to different markets of the city, dal masoor was available at Rs105 to Rs110 per kg against fixed price of Rs100 per kg, dal maash at Rs170 per kg against Rs140 to Rs 160 per kg, chana white at Rs110 to Rs115 per kg against Rs90 to Rs100 per kg.

Basmati rice was being sold at Rs80 per kg and super karnal bansmati rice at Rs115 to Rs120 per kg against fixed price of Rs70 to Rs75 per kg and Rs 95 to 100 per kg respectively.

Sugar and tea were being sold at Rs70 per kg and Rs440 per kg respectively. Red chilli powder was being sold at Rs270 per kg against official price of Rs240 to Rs260 per kg.

Besides, butchers were selling mutton and beef on very higher rates against the notified prices.

A low-paid employee Zafar said that the price hike had adversely affected the common man making it difficult for him to meet both ends. “The working class with limited resources finds it difficult to manage the kitchen budget due to unchecked price hike,” said another employee.

A daily wager Irfan said the price hike had exposed the government’s claims of a stable economy. He said the inflation and price hike had made it impossible for a common man to manage his budget. He said the government was more interested in power politics than in solving public financial problems.

Record earnings by PIA

KARACHI: The Pakistan International Airline’s earnings are expected to touch Rs11.12 crore during the current financial year.

This meant a 91 per cent increase in two years, Air-Commodore Nur Khan, Managing Director of PIA, told the fifth Sales Conference of District Managers which opened in Karachi yesterday.

In March, the airline’s monthly earnings for the first time crossed the Rs1 crore mark. This was almost double the revenue for the same month two years ago.

The Managing Director said PIA was to buy three Boeing 720Bs, costing five million dollars each to boost its operational efficiency on national and international routes.

Air Commodore Nur Khan said that the Boeing 720B is similar to the 707, but, being fitted with the new turbo-engines, it is quieter, needs shorter runways and has better operating economics.

The addition of the new aircraft will enable PIA to run an all-jet service between East and West Pakistan and also to increase
the frequency of its services on international routes.

Air Commodore Khan disclosed that 80 per cent of the total cost of purchasing the 720Bs would be met by a loan from the Export-Import Bank of Washington.

Inflation likely to remain 17pc in next six months

PIDE Inflation Expectations Survey for March expects 15.5 per cent inflation for the current month and 16.4 per cent for next month.

ISLAMABAD: Results of a survey on ‘inflation expectations conducted by the Pakistan Institute of Development Economics (PIDE) have indicated that the expected inflation rate during the next six months will remain 17 per cent and 16.6 per cent for the current year.

Persistent high inflation, policy credibility; political crises in some of the oil-exporting countries, implementation of RGST and prevailing law and order situation are fueling public expectations about future high inflation, according to the findings of the survey released here on Friday.

PIDE Inflation Expectations Survey for March expects 15.5 per cent inflation for the current month and 16.4 per cent for next month.

While expecting high inflation and high unemployment, respondents of survey remained skeptical about the growth rate in future.

They think that inflation in Pakistan is largely driven by food prices, bad governance and oil prices.

According to survey results, tight monetary policy is hardly the panacea to meet the inflation target of 9.5 per cent.

Supply shock is the major source of inflation in Pakistan, so the only tight monetary policy is not the solution of the problem. Monetization of fiscal deficit is also contributing factor in inflation.

In response to the question regarding effectiveness of the policy to curb inflation, a vast majority of the respon-
dents (81.7 per cent) suggest that both monetary and fiscal policy be used to curb inflation.

Experts believe that government should avoid monetization of fiscal deficit to control inflationary pressure.

About 50 per cent respondents were in favour of easy monetary policy and 30 per cent prefer tight monetary policy for revival of the economy.

Exchange rate is an important channel through which affects output and prices. Higher interest rate makes domestic financial assets attractive and this induces the appreciation of the domestic currency.

But due to lack of competitiveness of the external sector of the economy, domestic currency is continuously in pressure and 61.5 per cent respondents are expecting that domestic currency will depreciate in next six months.

About 20 per cent of the respondents expect that exchange rate will appreciate in the coming months, while the remaining
are of the view that there will be no change in it.

Survey results indicate that experts are skeptical about growth rate.

About 47 per cent are of the view that growth rate will remain the same in the coming months whereas 39.1 per cent are expecting low growth in the coming months.

A majority of the respondents considered that government policies are ineffective to boost growth and reduce unemployment in the country.

A vast majority (68.8 per cent) of the respondents are expecting high unemployment in the next six months.

Slow Trading in Cotton

KARACHI, April 15: The activity on the cotton market on Friday remained relatively slow as ginners held back their unsold stocks owing to fresh fall in prices.

Reports from the global trading centres, notably from the New York futures market, were bearish as the decline continued for the fourth session in a row on selling prompted by reports of higher crop estimates, floor brokers said.

Both the ruling May and the forward July contracts were marked further down by 1.31 and 2.64 cents per lb at 196.04 and 178 cents, respectively, what the local spinners called a retreat toward a competitive price outlook for the world consumers, they added.

Stray lots including some odd ones, however, did change hands around Rs11,000 per maund but spinners anticipating further decline kept to the sidelines most of the time, market sources said.

Unlike the previous sessions, spinners and mills seem to be in a winning position as ginners are inclined to clear the backlog of unsold stocks, while spinners are seeking fresh decline, notably for the inferior lots, they said.

According to some analysts bulk of the fine lots had already been sold at an average price of Rs12,500 per maund and now some low-mix lots are being offered by the ginners at the lower prices.

Official spot rates were held unchanged at the overnight level of Rs12,000 per maund but in the ready section some of the deals were done well below them.

Mill ready off-take was light as under:

159 bales, Dharki and 200 bales, Mian Channu at Rs11,000 and 200 bales, Muhammadpur Dewan at Rs11,200.

Gold: All Time High in History

LONDON, April 15: The price of gold reached a record high above $1,480 on Friday with investors piling into the safe-haven precious metal as global inflation spiked higher and eurozone debt worries resurfaced.

Gold hit $1,483.38 an ounce on the London Bullion Market, building on a series of records through the week.

“It seems investors are still more concerned about the threat of debt-default by peripheral EU nations and rising inflation indicators following higher-than-forecast inflation readings

from India and China,” said James Moore, analyst at research group Fast Markets.

The record came after China said its inflation hit a 32-month high, suggesting Beijing’s efforts to rein in soaring costs are still falling short.

The consumer price index rose 5.4 per cent year-on-year in March — the fastest pace since July 2008 and well above Beijing’s 2011 target of four percent — and 5.0 percent in the first quarter.

The market has been reacting to (the credit issues in peripheral Europe) by looking for ways to protect themselves from these types of risks, and gold is seen as a way to do that, said Deutsche Bank analyst Daniel Brebner.

He said the main impact on gold of elevated debt levels in Portugal, Greece, Ireland and Spain came from the ways in which euro zone authorities addressed the issue.

Do we see a bailout, do we see more money being extended into these countries, do we see monetary accommodation remaining very much the bias in Europe? he said.

If that’s the case, that should be very supportive of gold markets. European shares dipped after the downgrade, while the cost of insuring against a default by Greece and Ireland rose on growing speculation Greece will eventually have to restructure its debt and after the Moody’s downgrade.

Among other commodities, oil prices eased as the dollar firmed, although they remain near multi-year highs as fighting in Libya continues, supporting fears output could be hit.

Stronger oil prices also tend to benefit gold prices.

Goldman Sachs recommended investors go underweight commodities over a three to six month horizon, echoing its call from Monday, saying oil prices are higher than justified by current supply and demand. But gold prices look set to remain firmly underpinned.

The bullion market has found support one day from economic uncertainty and changes in risk sentiment, and on another day by high oil and food prices, and on yet another by sovereign risk and fiscal concerns, said HSBC analyst Jim Steel in a note.

Elsewhere, shares in some North American silver miners fell sharply overnight after Bolivia’s leftist government said it might rescind concessions on four mines in the country run by Glencore International Ltd affiliates and Canada’s Pan American Silver Corp.

Bolivia was the world’s sixth-largest primary silver producer last year, metals consultancy GFMS said in a report, with output of 41 tons.

Oil Prices Fall

LONDON, April 15: Crude prices fell on Friday, weighed down by a sharp inflation rise in China, the world`s largest consumer of energy, and as the market awaited a weekend presidential vote in oil exporter Nigeria.

New York`s main contract, light sweet crude for delivery in May, dropped 25 cents to $107.86 a barrel.

Brent North Sea crude for June delivery shed 20 cents to $121.80 in London trade.

The news from China today is having a dampening effect on oil prices because the market is expecting the Chinese government to raise (interest) rates following the inflation data, said Thina Saltvedt, analyst at Nordea Bank Norge.

China on Friday said its inflation had hit a 32-month high, suggesting Beijing`s efforts to rein in soaring costs are still falling short.

China`s consumer price index rose 5.4 percent year-on-year in March — the fastest pace since July 2008 and well above the government`s 2011 target of four percent — and 5.0 per cent in the first quarter.

The oil market was also looking ahead to weekend elections in Nigeria, a key exporter of crude but which is regularly hit by supply disruptions owing to unrest between rebels and the African nation`s government.

Any political unrest created from the polls in Nigeria could further increase the geopolitical risk and may retrace recent losses in the price of oil, said Nick Campbell, an analyst at energy consultants Inenco.

Nigeria votes for a president Saturday in what may be a historic moment for Africa`s most populous nation as it bids to end years of vote-rigging and hold its cleanest polls for head of state in two decades.

An enormous effort has been undertaken to organise a fair vote and break with a series of deeply flawed ballots, but violence poses a serious risk, with bomb blasts and other attacks having killed dozens in the run up to polls.

The clear favourite is President Good luck Jonathan, who has had an almost accidental rise to power that culminated with him being thrust into office last year following the death of his predecessor, Umaru Yar`Adua.

His main challenger is ex-military ruler Muhammadu Buhari, whose reputation as a stern anti-corruption figure in one of the world`s most graft-ridden nations has won him significant backing.

The oil-producing Niger Delta region, hit by years of violence, has meanwhile seen relative calm following a 2009 amnesty deal, but the situation remains fragile, and many have warned of a likely eventual return to unrest.

Study reveals cost of nitrogen pollution

The study was carried out by 200 experts from 21 countries and 89 organisations, who came up with recommendations on how to reduce the amount of nitrogen in water, the air, the earth and ecosystems.

LONDON: Nitrogen pollution costs Europe between 70 and 320 billion euros ($100bn-$460bn) per year in its impact on health and the environment, according to a major European study launched in Britain on Monday.

The first European Nitrogen Assessment, the result of a five-year research programme, found that the costs represented more than double the benefits for the continent’s agriculture sector.

The study was carried out by 200 experts from 21 countries and 89 organisations, who came up with recommendations on how to reduce the amount of nitrogen in water, the air, the earth and ecosystems.

The invention of synthethic fertiliser in the early 20th century revolutionised agriculture, multiplying yields and improving quality.

However, the amount of nitrogen in the environment has doubled on the world level, and tripled in Europe.

ENA coordinator Mark Sutton said: “More than half the world’s population relies on synthetic nitrogen fertiliser for food production, but measures are necessary to reduce the impact of nitrogen pollution.

“The solutions include more efficient usage of mineral and organic fertiliser (manure, liquid manure and compost) and eating habits aimed at more moderate meat consumption.

“We have the know-how to reduce nitrogen pollution, but we must start applying these solutions at the European level in an integrated way.”

The event in the Scottish capital will bring together scientists and policy makers to launch the ENA and discuss the latest scientific progress on nitrogen.

ECC allows sale, export of 200,000 tons of wheat

Finance Minister Hafeez Shaikh chairing the ECC meeting.-

ISLAMABAD: The Economic Coordination Committee of the cabinet expressed concern on Monday over non-implementation of its decisions and observed that it was being dragged into issues outside its jurisdiction.

“The overall sense of an ECC meeting was that the decisions were falling prey to the bureaucratic system,” an official said. The members were so upset over the situation that they decided to make their point of view public, albeit through a soft official statement which said: “The minister for finance, as the chairman of the committee, observed that the pace of the implementation of the decisions is slow and instructed the secretaries concerned to accelerate it.”

The meeting presided over by Finance Minister Abdul Hafeez Shaikh approved the sale and export of 200,000 tons of wheat currently lying with the Pakistan Agricultural Storage and Services Corporation to create space for the fresh stock procured from farmers.

The committee decided to ban institutional investments in the National Saving Schemes (NSS) because of its higher returns, although investments by individual funds like pension, gratuity, superannuation, contributory provident funds and trusts would remain unaffected.

According to sources, the committee held a prolonged discussion on the criteria on which summaries were being brought before it and on reasons for the slow pace of implementation of its decisions. It was observed that many cases which should be disposed of by the ministries or taken to the cabinet for policy decisions were also brought to the ECC.

The minister expressed disappointment over lack of preparation by federal secretaries to defend their summaries as most of the questions raised by ECC members were not responded to satisfactorily, the sources said.

Minister for Housing and Works Makhdoom Shahabuddin and Minister of State for Foreign and Economic Affairs Hina Rabbani Khar also expressed disappointment over lack of implementation of ECC decisions.

The summaries for disposal of Passco’s wheat stock, provision of Rs12.22 billion subsidy on urea prices and ban on institutional investment in the NSS were elaborately discussed, an official said.

The sources said the committee remained at a loss about fixing fertiliser prices. “Who determines the urea prices? Is there a board or a committee or is it the private sector that controls the prices?”, a member was quoted as having asked the industries ministry.

“The Trading Corporation of Pakistan and the secretaries of the ministries of industries and food and agriculture did not have an answer,” the official said.

The ministry of industries and production had sought a subsidy of Rs12.22 billion on urea for the last two crop seasons and then a uniform price comparable with the private sector from now onward.

The ECC was also perplexed that the price of urea imported through open tenders was much less than that of 225,000 tons imported from the Saudi Basic Industries Corporation (Sabic) — a government-owned manufacturer of Saudi Arabia.

The committee had been informed that urea had been imported through open tenders during January-July last year at Rs1,902 per 50kg against Rs2,102 of Sabic.

The urea price charged by local manufacturers averages at Rs2,350.As a result, the 313,000 tons of urea imported from Sabic for Kharif 2010 involved a subsidy of Rs4.72 billion against Rs3.18 billion for 287,000 tons imported through open tenders.

Another Rs4.32 billion subsidy was involved in import of 400,000 tons of urea through open tenders between June and December, taking the total amount to Rs12.22 billion.

The industries ministry had also proposed to sell imported urea at official storages at Rs50 less than the domestic price to allow the dealers to absorb the transportation cost.

In view of the complexities and because of an impression of vested interests, the ECC constituted a committee comprising the secretaries of finance, planning, commerce, industries and food and agriculture and the TCP chairman to submit a detailed report on the subject at the next meeting.

A participant said the decision on institutional investments in the NSS should have been taken by the prime minister. The finance ministry had earlier submitted the proposal to the prime minister who had said it should be discussed by the ECC.

Agri sector burying under input prices

LAHORE, April 9: The agriculture sector in Punjab, and in Pakistan by extension, is going down by the year and no-one is trying to retrieve the situation, the AgriForum Pakistan claimed here on Saturday.

After a meeting to determine the causes of the downfall, forum chairman Ibrahim Mughal claimed that people had to pay exceptionally high prices of food because input prices had gone up by 100 to 300 per cent in the last three years.

He said that participants from all over the province were of the firm opinion that a total lack of planning, weak administrative machinery, expensive inputs and reduction in use of certified seed played havoc with the sector.

Almost all crops missed the official target during the last two years, but no-one seems to bother in the official circles.

In 2009-10, the gram target was fixed at 655,000 tons, but only 490,000 tons was produced. The lentil target was missed by 50 per cent; only 5,000 tons were produced against a target of 10,000 tons. Only 29,000 tons canola was produced against a target of 75,000 tons and sunflower target was missed by almost 30 per cent.

In 2010-11, the cotton target was missed again despite reduction in weight of cotton bale; only 8.5 million bales were produced against a target of 9.7 million bales. All the BT benefit was lost due to bad planning. Rice target was fixed at 3.4 million tons but only 2.6 million tons were produced.

Moong target, which was fixed at 139,000 tons, was missed by 77,000 tons and the mash target was also missed by 50 per cent, 5,000 ton production as against 10,000 tons target.

No heads were rolled despite such a poor performance. If such gross negligence and the policy failures have to be ignored, one can easily understand the departmental inertia, he said and added: “This lack of reward and punishment is a sure recipe for destroying any sector, and, in fact, it has destroyed the agriculture in the province.”

The second biggest reason for agriculture destruction is the increasing cost of inputs, which literally have gone haywire — pulling the rug from under the feet of the sector, he insisted.

During the last three years of the present government, the price of di-ammonium phosphate has risen by a staggering 307 per cent — from Rs993 per bag in 2008 to Rs4,049 per bag in 2011.

The urea prices have gone up from Rs527 per bag to Rs1,150 per bag, a rise of 118 per cent. The price of nitrogen phosphate (NP) has gone up from Rs670 per bag to Rs2,622 per bag, an increase of 294 per cent.

During the same period, the price of calcium ammonium nitrate (CAN) fertiliser has increased by 145 per cent — from Rs396 per bag in 2008 to Rs972 at present. The price of single super phosphate (SSP) has also gone up by 145 per cent.

As if this was not enough, the diesel prices have gone up by 64 per cent — from Rs57.14 per liter to Rs94 per liter. Electricity prices have increased by 85 per cent and tractors’ price has also gone up by another 85 per cent. Can any sector absorb this kind of increase without reflecting it in the output? These are precisely the reason behind the increase in food prices.

If the sector continues missing production targets, putting pressure on the supply side, and is forced to use exceptionally high inputs, it does not take a genius to calculate what will happen to the output.

The government needs to take an elaborate consultative process that brings all stakeholders on one platform to thrash the issues out. Till then, one can only hope against the hope and keep praying for the sector, he warned.

Dollar slides

IN the local currency market, calm prevailed in the absence of major activity. Dollar supplies were sufficient to meet market demand this week.

However, the rupee came under extended pressure against euro which crossed Rs122 barrier during the week. In the inter-bank market, the rupee showed all round gains versus dollar this week.

On the opening day, dollar traded at Rs85.38 and Rs85.42 after the rupee picked up two paisa on the buying counter and another three paisa on the selling counter over previous week close of Rs85.40 and Rs85.45. The rupee further posted fresh gains of 12 paisa on the buying counter and 11 paisa on selling counter on April 5, changing hands against dollar at Rs85.26 and Rs85. On April 6, the rupee overnight firmness persisted versus dollar as the parity continued its upward advances forcing dollar to shed 11 paisa on the buying counter and 12 paisa on selling counter at Rs85.15 and Rs85.19. Another 31 paisa rise in rupee value on April 7 pushed the dollar to the week’s lowest level at Rs84.84 and

Rs84.88. Rising trend persisted in the last trading session. The rupee extended further gains versus dollar and was up two paisa for buying and 3 paisa for selling at Rs84.82 and Rs84.85 at the close of the week.

This resulted in overall increase of 58 paisa in rupee value against inter-bank dollar this week.

In the open market, continuous healthy dollar inflows amid low demand helped the rupee strengthened versus US currency this week. The week commenced on a dismal note as the rupee shed five paisa against the dollar and traded at Rs85.20 and

Rs85.40 on April 4, after ending last week at Rs85.15 and Rs85.35. It, however, assumed upward rising trend against the dollar in the rest of the week. The rupee gained 5 paisa and traded at Rs85.15 and Rs85.35 on April 5.

Another eight paisa gain on April 6 helped the rupee extend its overnight firmness versus dollar which was seen trading at Rs85.07 and Rs85.27 at the end of the third trading session. On April 7, the rupee further strengthened against the dollar as it appreciated for the third successive day, trading up seven paisa at Rs85.00 and Rs85.20.

Finally in the last trading session on April 8, the rupee/dollar parity closed the week in positive mode with the rupee further picking up 10 paisa in relation to dollar which traded at Rs84.90 and Rs85.10. This week, the rupee in the open market posted 25 paisa rise against US currency.

Versus euro, the rupee showed a fluctuating trend this week. It came under mounting pressure against euro and breached Rs122 barrier, despite resistance.

The week commenced in a negative mode with the rupee trading against euro at Rs120.74 and Rs121.24 in the first trading session, 20 paisa lower against last week close of Rs120.54 and Rs121.04.

In the second trading session, however, the rupee managed to stage a recovery against euro. It traded 30 paisa lower at Rs120.44 and Rs120.94.

The rupee further depreciated in relation to euro in the third trading session. It traded down 98 paisa at Rs121.42 and Rs121.92.

In the fourth trading session, the rupee, however, managed to recover 60 paisa on the buying counter and another 56 paisa on the selling counter with euro trading at Rs120.86 and Rs121.36. But in the last session, the rupee crossed Rs122 barrier after it shed 75 paisa in relation to euro, hitting the week’s lowest level at Rs121.61 and Rs122.11 on April 8. During the week in review, the rupee in the open market lost Rs1.07 on cumulative basis against the European single common currency.

On the international front, the euro on the opening day of the week hovered near a five-month peak against the dollar and an 11-month high against the yen.

The single currency last traded at $1.4217, down 0.1 per cent. Against the Japanese currency, the dollar was flat at 84.03 yen. It hit its highest level since September on last weekend, stalling ahead of an option barrier at 84.75. Against the dollar, sterling was up 0.2 percent at $1.6138 in London trade. It was not far from a high of $1.6176 hit earlier in the day, its strongest since March 24. On April 5, the euro neared a recent five-month peak on expectations of rising euro-zone interest rates. Against the dollar, the euro was flat at $1.4221, just below a session high of $1.4245 and near a five-month high of $1.4268 touched on April 4.

The dollar rose 0.9 per cent to 84.82 yen, having hit as high as 84.90 yen, a more than six-month high. Sterling rallied to a two-week high against the dollar in London trade.

It rose nearly 0.9 percent to a two-week high of $1.6279. On April 6, the euro retreated slightly at $1.4332 from $1.4220 a day earlier after hitting a 15-month high against the dollar but it still remained higher in late New York trading where it traded as high as $1.4349, its strongest level since January 2010.

The dollar was mixed in other trading, rising against the yen but slumping against most other major currencies around the world.

The dollar fetched 85.40 yen, up from the previous week close of 84.82 yen. In London, the pound hit a session low at $1.6257. It was last 0.1 per cent lower on the day against the dollar at $1.6280.

On April 7, the euro fell from a 14-month high against the dollar after the head of the European Central Bank dampened market expectations for aggressive interest rate hikes. In late New York trading, the euro was last down 0.3 per cent at $1.4292, off a more than 14-month high of $1.4350 touched a day earlier. Against the yen, the dollar fell to a session low of 84.57 yen after news of the latest earthquake in Japan. It was last at 84.88 yen, down 0.7 per cent. In London, sterling was down 0.2 per cent at $1.6296. At the close of the week on April 8, the euro rose to a 15-month high against the dollar since January 2010. The euro was also helped by reported Middle East sovereign demand.

It was up 0.9 per cent at $1.4432 with a session peak of $1.4444. Against the yen, however, the dollar rose 0.3 per cent trading at 85.28 yen, near a six-month high of 85.53 hit earlier this week.

Government unclear on agriculture tax

President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani have kept quiet on the tax issue.

ISLAMABAD: Although there has been a lot of talk about tax on agricultural income in recent weeks, there is a lack of clarity in the government`s position on the issue and it appears that there are no concrete plans for taxing the income of landlords and property owners for generating additional revenue.

And government leaders and officials appear to be reluctant to come up with a clear-cut decision or a plan of action.

Finance Minister Hafeez Shaikh recently made public his plan to tax the affluent class, including owners of large land holding and expensive property. But he did not elaborate the plan.

President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani have kept quiet on the issue.

A meeting of the economic advisory council headed by economist Dr Hafeez Pasha held on Thursday observed that there was massive evasion of tax in the agriculture sector and advised provincial governments to send notices to the big landlords asking them to file returns.

However, the meeting did not discuss the structural hindrances which cause a low collection from the sector.

As a first step, the government will have to adopt a produce index unit (PIU) for the assessment of tax on agriculture income in the provinces and improve land revenue records, Vakil Ahmad Khan, a senior member of the Tax Reform Coordination Group (RCG), says.

Talking to this reporter on Sunday, he said: “The government may not be able to levy a central income tax on agriculture in the short term until these structural problems are removed.”

As a result of land reforms, the government has set 50-acre land holding as the benchmark for income tax exemption.

This has provided room to landlords, especially in Punjab, to minimise their land holdings to evade taxes by transferring ownership on paper to their relatives and servants.

An official of the Federal Board of Revenue said that unless the government did away with the benchmarking mechanism it would not be possible for the provinces to raise sufficient revenue from big landlords.

At the moment, provinces are charging tax on the basis of the size of land instead of its productivity and efficiency, which has yielded negligible revenue in Sindh, Khyber Pakhtunkhwa and Balochistan as compared to Punjab over the past more than 60 years.

RCG member Vakil Khan said: “In principle, the committee`s members are not against the agricultural income tax, rather they believe that that it can be adopted as a long-term remedy to raise the tax-to-GDP ratio.”

He said the PIU value should also be updated. The productivity of land had increased manifold in some areas and declined substantially in others. The PIU method for the assessment of income tax was proposed in the 1970s, he added.

It is believed that the tax exemption on agriculture has created a temptation for people to show a part of their income from other sources as agricultural income to evade income tax.

The government of Zulfikar Ali Bhutto had imposed a tax on agricultural income through an ordinance in 1977, but before the law could be enforced Gen Ziaul Haq promulgated martial law and suspended the tax. The matter was then left to the provinces, yielding negligible revenue.

Export boom may be unable to repair economy

KARACHI, April 10: After a year of unemployment and wondering if his family would be better off if he died, textile worker Murad Ali has got the spring back in his step.

One of thousands laid off by textile bosses last year, the father of four is now back at work and one of those to benefit from a surge in exports in the current fiscal year, which ends on June 30.

Experts say rising global commodity prices, a government decision to prioritise power supply to industry and currency devaluation that has made Pakistani products more competitive, have fired an export boom.

Compared with the same period last year, the Trade Development Authority of Pakistan says textile exports such as silk rose 25.8 per cent and agricultural produce, such as basmati, rose 6.2 per cent from July to February 7, 2011.

The textiles sector is one of the key drivers of the Pakistani economy, accounting for 55 per cent of all exports and 38 per cent of the workforce, according to official figures.

Bosses have rehired staff who were laid off, but Ali is only getting a third of the salary as a skilled garment worker that he used to command. “I`m earning less than last year. It is difficult to live a better life due to price rises, but I`m happy,” Ali said.

He has re-enrolled his sons at school but his wife will continue to work as a maid. Money is too tight for her to go back to being a housewife.

“The situation has drastically changed in the favour of the country`s economy,” said textile tycoon Mirza Ikhtiar Baig, who employs more than 2,000 workers and predicts exports will rise 10 per cent for the fiscal year 2010-11.

“Now with demand for Pakistani products rising internationally we are employing more workers. Our exports are getting healthier because of an increase in international commodity prices and the government`s will to give top priority to the country`s economy,” said Baig, an adviser to Prime Minister Yousuf Raza Gilani.

The Asian Development Bank forecasts GDP growth for Pakistan of 2.5 per cent for fiscal year 2011 despite pressures from unprecedented floods in 2010, with a relatively modest rebound to 3.7 per cent for fiscal year 2012.

But behind the headlines, experts warn that the exports boom is a mirage that barely even papers over how sick the economy really is in a country where suicide and bomb attacks have killed more than 4,200 people since 2007.

Pakistan suffers from a profound electricity crisis that restricts production to around 80 per cent of its needs — a situation that will only worsen as the temperatures crawl higher in the coming months.

The budget deficit has grown to 5.5 per cent of GDP, above a 4.9 per cent target for the current fiscal year to June 30.

To fund the shortfall, the government borrowed $4.4 billion from the central bank from July 1 to February 28, a move that adversely affected inflation, rather than raise taxes and cut spending as the IMF and World Bank would like.

British Prime Minister David Cameron last week joined a chorus of pleas from the United States on Pakistan to tax its wealthy, pointing to one of the lowest tax-to-GDP ratios in the world.

In November 2008, an increasingly bomb-torn Pakistan was rescued from the brink of bankruptcy thanks only to a rescue package from the IMF that hauled the nation back, with inflation at a 30-year high and fast depleting reserves.

Mohammad Sohail, head of the Karachi-based Topline Securities research and brokerage house, said the export boom would contribute to economic recovery, yet warned the gains were minimal.

“It is very fragile because the fiscal deficit is much higher than the target of 5.3 per cent because of the government`s heavy borrowing from the central bank,” he said.“The overall economic dynamics suggest that our growth rate may not be more than two-and-a-half per cent this fiscal year.

“Furthermore, the overall security situation in Pakistan is very uncertain, which is making the foreigners and local investors wary all the time.”

Independent economist A.B. Shahid said rising international oil prices had hit the country`s economy hard, adding $4 billion to the oil bill.

Pakistan could have benefited more from 8-9 per cent export growth, he said, by exporting cloth in its value-added forms rather than raw cotton and yarn.

While Ali is content with life, he is also wary of uncertainties ahead. “Life has become too insecure. Everyone is ill at ease. Let`s just wait and see.”

Rain brings a chill of fear to farmers

RAWALPINDI/ISLAMABAD, April 10: Rain, varying in consistency from drizzle to light shower, on Sunday lashed the twin cities of Rawalpindi/Islamabad and adjoining areas bringing the temperature down and creating fears among the farmers that the wet spell could spoil their ripe crops.

The intermittent rain started in the morning and continued till filing of this report at 10pm.

The showers brought the maximum temperature down from 29 to 14 degrees Celsius in the capital city and 29 to 15 degrees in Rawalpindi. The Meteorological Department recorded two millimetres of rain in Islamabad and three mm in Rawalpindi.

It forecast more rain and cool winds sweeping northern parts of Pakistan in the next 24 hours. “A low pressure has developed over northern Pakistan. Islamabad and neighbouring areas can expect more rainfall during the next 24 hours and the temperature is likely to further decrease in the coming days,” said an official of the department.

He said gusty winds and hailstorm were recorded in some areas of the Rawalpindi division, including Chakwal.

The overcast sky, green-blanketed rolling Margalah Hills, clean and fragrant atmosphere gave the federal capital a heavenly look but made difficulties for people in some areas as rainwater accumulated on some roads and streets due to collapsed sewerage system.

The rain also threw the normal life out of gear. Most of the residents opted to stay indoors in order to avoid the mud on the streets.

“I could not take my children to the nearby park due to the rain and chilly wind,” said Ashar Ali, a resident of Chaklala Scheme-III.

The temperature dropped considerably and the sale of samosas, pakoras, shawarma and jalebis suddenly picked up, resulting in long queues at sweet shops.

However, the rain had least impact on the book bazaars set up along the footpaths of Bank Road, Haider Road and Kashmir Road in Rawalpindi Cantonment. “We are here to get books as their prices have jumped up,” said Faisal Sheikh, a booklover.

Weekly bazaars witnessed low turnout due to the rain. Mostly people avoided visiting the bazaars due to the slushy mess. The stallholders complained about low turnout and also criticised the city district government for providing grounds along nullahs for the establishment of the bazaars.

On the other hand, many youngsters were seen on Benazir Bhutto Road from Secretariat-II Chowk to Marrir Chowk, Adamjee Road and Committee Chowk underpass ridding motorbikes and displaying dangerous stunts.

Meanwhile, farmers in the suburban areas of the twin cities feared that the rain spell would spoil their crops as they were planning to harvest wheat. “In this season, the wheat crop is fully grown and the strong wind lay down the crops and heavy showers spoil the wheat,” said Mohammad Riasat, a landowner in Tarnol.

In Gujar Khan, the farmers were also worried about the ripening wheat as rain at this stage may harm the crops.

Besides wheat, harvest of grams and pulses is also underway and the rain may hamper the process. “The rain at this stage is harmful for wheat and the dark clouds on the sky also frighten us about the impending hailstorms that can devastate the grains,” said Raja Munsab, a farmer.

Heavy downpour lashed Attock and the adjoining areas turning the weather cold after a brief spell of high temperature. Light shower started with cold breeze in the morning which later turned into heavy rain that continued till filing of this report. The visibility remained very low particularly in the morning due to the thick clouds. The rainwater also accumulated on roads causing disruption in traffic. However, the people preferred to stay indoors because of the holiday.

Gram crop to achieve output target

GRAM – the second largest Rabi crop acreage wise — is expected to achieve its production target of 623,000 tons, making it a good season for agriculture. Farmers are also hoping to hit a dreamy wheat target of 25 million tons. Both these crops would definitely boost country`s agriculture output. Gram, commonly known as poor man`s protein for its healthy dietary value, is to be harvested by the end of April. Though the crop`s achieving the production target can only be welcomed, it is also time to assess the potential of the crop and see how it could be improved further. Especially, as international grain prices are increasing and may take pulses price upwards with them putting additional pressure on the poor.

As far as acreage is concerned, gram falls fifth on the national list after wheat (22 million acres), cotton (eight million acres), rice (six million acres) and maize (three million acres). It is sown on 2.7 million acres, which is more than the much politicised cane crop which covers only 2.2 million acres. Of the one million tons requirement, the local crop meets 85-90 per cent. By that calculation, the crop would still be less than the need, and may be imported to meet the requirements.

This is pathetic to say especially when the country had produced over 200,000 tons more than the current target. In 2006-07, gram production stood at 823,000 tons. This was the result of policy measures, which included “intervention price” and later induction of Pakistan Agriculture Services and Storage Corporation (Passco) into procuring gram to stabilise price. Both the measures increased gram production by 75 per cent within a span of one year. Unfortunately, due to official neglect slide in production started from the very next year.

The slide was officially accepted, rather engineered. No one can explain the logic behind fixing 25 per cent less target for the next two years than what has already been achieved. Last year, the production target was reduced to 553,000 tons – 33 per cent less than 2006-07 production. This year, the official target was 623,000 tons – some 25 per cent less than the same. Why the targets were revised downwards, no one knows. Especially when the national requirement is more than that, and the country faces shortages and high price once production drops.

The second factor that increased production during 2006-07 was improved seed. As per official record, around 1,510 tons improved, not certified, seed was used during that year and production skyrocketed. In subsequent years, the usage dropped exceptionally, and so did production. In 2007-08, only 206 tons improved seed was used.

Next year, it dropped to 180 tons and to 172 tons last year. If total requirement of seed is considered, it comes to around 81,000 tons – at a rate of 30kg per acre for 2.7 million acres. Out of these 81,000 tons, if farmers use only 172 tons improved seed, one cannot, and should not, expect any miracle out of the crop, despite all other good practices and favourable climate.

It only goes to prove that seed is crucial to grams production. But there has not been much varietals improvement in gram seed. One wonders if genetic improvement can be bought to cotton, rice and maize seeds, what deters the government from encouraging seed agencies for doing the same to gram. No multinational or a local private company deals in gram seed, leaving over 70 per cent of farmers with traditional varieties, which have become highly susceptible to all kinds of diseases – fungi, bacteria, nematodes and viruses.

The government must ask the official agencies dealing in seed business to come up with some better varieties of gram (both desi and kabuli ). That is exactly where the planners need to concentrate.

Apart from seed, the crop also suffers few other problems that must be dealt with. They include pests, poor agronomical practices and water availability. As far as diseases are concerned, experts believe one way of dealing with them is to stop sowing gram in the area for three to four years. It could break the pest cycle and help gram grow better.

But, to stop gram sowing, farmers need alternative crop. Cotton can be one option. India has successfully taken major portion of cotton crop to rain-fed area and some companies in the country have also experimented with the same, with encouraging results.

In addition to a shift in crop cycle, the government should also help farmers improve agronomical practices. Since soil in the rain-fed areas is largely un-even, fields` preparation becomes even crucial. Deep sowing with drills is the most desirable practice in gram areas as traditional sowing (throwing the seed) drastically reduces yield.

Since the entire crop is restricted to rain-fed areas, reliable water supply is crucial to the crop. Other gram producing countries, like China, have developed mobile water units or have taken the crop to sprinkle and drip irrigation. Such models are still to be explored here.

The entire concentration of the crop in Punjab, over 85 per cent is only in rain-fed areas, which happens to be the most backward as far as agriculture, development and administration is concerned.

The crop thus falls much below the official priority list. Given its nutritional value, especially for the poor, gram must be taken out of neglect, and be saved from these small problems. The government needs to take these small steps to achieve big result.

Concerns over Food Security

THE food prices index around the world has surged to a new height compelling a few countries of North Africa and the Middle East to store wheat and rice in bulk. And governments of Mexico, South Korea and developing countries of Asia are paying huge subsidy to buy and store crops. It is also feared that rising oil price may result in increase in demand of food items. The Food and Agricultural Organisation (FAO) has advised developing countries to avoid the option of producing bio-fuel from corn.

According to a report, a number of developing countries have used 120 million tons of cereal food as alternate source of energy by converting it to bio-fuel paying huge subsidy of $13 billion. Naturally, this will lead to rise shortages and increase in prices which may create serious food shortage as suffered in 2007-08.

To confront such eventuality, Pakistan will have to activate research and development cells of its agricultural sector and encourage the use of high yield seeds to improve productivity so that it not only meets its domestic needs but also boosts exports.

Though the present government, with a view to increasing the income of farmers and curb smuggling of wheat across the border, has increased support price of wheat to double from Rs425 to Rs950 per maund, the move has resulted in increase in wheat and bread prices.

The Director of World Food Programme in Islamabad has recently described the wheat support price as the root cause of price hike. According to a rough assessment, 10 per cent increase in support price results in three per cent rise in prices of food items. The 120 per cent increase in the support price of wheat has resulted in an increase of 32 per cent in the prices of its items.

On the other hand, the recent flood adversely affected production of crops taking prices of food items to a new height and creating sugar crisis which rose to Rs90 per kg, but with cut in sales tax by 50 per cent, the price was brought down.

Since the government will not be able to continue this subsidy for a long period, sugar price may go up again by Rs10 per kg.

Experts are of the view that the issue of food security will keep on nagging the world. Thank God, Pakistan is now a wheat and rice exporting country. But then for tea and cooking oil it has to rely heavily on imports.

Recently because of increase in fuel and power rates, food items recorded an increase of 17 per cent. Government sources said import of our food items recorded a rise of 74 per cent between July 2010 and January 2011, taking our import bill to $3.15 billion. This trend is visible globally and the uprising in Tunisia, Egypt and Libya are its consequences.

Last year I visited the UAE, representing a delegation of businessmen and met UAE Minister for Commerce Sheikha Lubna Khalid Al Qasmi to discuss bilateral trade and investment. She informed me that during the last GCC meeting the question of food security in the Gulf countries was high on their agenda and it was decided to purchase agricultural land in other countries to produce and import food items for the Gulf states. The UAE wanted similar arrangements with Pakistan.

I informed her that the UAE was already cultivating Alfalfa in some parts of Sindh for export to UAE. In addition to Pakistan, UAE is also cultivating fodder in Sudan, Spain, Canada and some other countries.

Sheikha Lubna said the UAE was even ready to build small dams for cultivation on the lands they would acquire in Pakistan, provided the government ensured that there would be no ban on export of these items.

In short, food security is common concern for both rich and poor. Both developed and developing countries are therefore, making long-term plans to meet their food requirements.

Pakistan is fortunate to have a vast fertile land and an effective irrigation system. We are blessed with four seasons and our farmers are hard working. All we need is good network of transportation of farm products from field to storage. We should also add value to our items and improve packaging for exports.

Owing to huge increase in prices of agricultural products, the farmers/agriculturists are supposed to have earned additional Rs250 billion through cotton trade and Rs230 billion from wheat and rice. Unfortunately much of this additional amount went to the pockets of the middlemen and the big landlords.

The Director World Food Programme in Islamabad, Wolfgang Herbinger in a report said that due to increase in food prices about 70 per cent of flood victims in Pakistan had to borrow money to meet their day-to-day needs. Pakistan is producing food items in abundance but due to high prices and poverty, the purchasing power of the common man is gradually decreasing.

It is therefore imperative to review the agriculture policy to attain autarky in food crops and provide essential food items to the common man at affordable rates.

WEEK 14, 2011: World commodities

Oil

BRENT crude dropped on April 7 in Asian trade after five straight days of gains, slipping below $122 a barrel on concern that rising prices will hurt demand from the world’s top oil consumers the United States and China.

Unrest in oil exporting regions North Africa and the Middle East continues to support prices, as investors fear the turmoil could hamper more supplies after civil war interrupted the flow from Libya.

Brent crude fell 54 cents to $121.76 a barrel rising to a 2-½-year high above $123 on April 6. US crude futures declined 51 cents to $108.32 a barrel after touching $109.15 a day earlier, the highest since September 2008. High crude prices are pushing up retail fuel prices worldwide, exacerbating the inflationary pressure governments face from the rising cost of food and raw materials.

The International Energy Agency said on April 6 that the current oil price is harming global economic growth and is a mounting concern for consuming nations. Saudi Arabia and the United Arab Emirates have raised output to compensate for supply loss from Libya but there has been no coordinated supply policy response from Opec to rein in high prices.

The latest data from the United States showed that gasoline and distillate demand has stalled while China raised retail prices to record highs to ease the burden of higher crude prices for state refiners. US government data on April 6 showed gasoline demand at the world’s top oil consumer fell 1.2 per cent from year-ago levels. Gasoline demand should pick up as the driving season begins in the United States, but high prices would temper growth in consumption.

Oil prices will soar above $130 a barrel by late 2011, a new Reuters poll found, and one in five traders said they expected oil to hit $150 this year, levels some economists say could trigger recession.

With no end in sight to the unrest in the Middle East and North Africa, the majority of the 32 major oil traders, bank analysts and hedge fund managers surveyed by Reuters said they expect oil prices to resume their climb later this year after a short-term retreat.

Brent futures, a global benchmark oil contract, has risen almost $8 over the past five days to settle at $122,30 on April 6. They have jumped above $120 a barrel last week for the first time since 2008. World oil prices in the $130-$150 range ring alarm bells for macroeconomic forecasters.

In the New York market, Brent rose to 2½ year high above $123 a barrel on April 6. Mounting evidence that fighting in Libya, an Opec member, could continue to disrupt oil supplies as well as simmering tensions in the Middle East region has pushed up prices. The IEA warned that the current prices could slow the global economy, but members of Opec insist that the market remains well supplied.

Gold

GOLD rose and silver surged to 31-year highs on April 4, as the fresh gains that pushed oil and grain prices to their highest since 2008 stoke inflation worries. While silver streaked ahead, rising to its strongest relative to gold since 1983 bullion prices have struggled for the past month to sustain new highs.

Activity in the US futures market on April 4 was less than half the average, set to be one of the weakest this year, as the metal struggled to extend its record high $1,447.40 an ounce set on March 24. Spot gold rose 0.4 per cent to $1,433 an ounce off an earlier high of $1,438.55 an ounce.

Rising oil and grain prices boosted gold’s inflation hedge appeal. US oil rose to a 2-½-year highs on geopolitical risks to supply from the Middle East, while corn futures rallied to the highest level since the 2008 global food crisis due to very tight supplies.

Silver climbed to its highest in 31 years at $38.58 an ounce, sending the gold-to-silver ratio to its lowest level in 18 years. It was later up two per cent at $38.48.

Silver prices are fast closing in on $40 an ounce, lifted by interest in the metal as a cheaper proxy for gold and expectations that industrial demand is set to improve. But analysts remain wary of silver’s extreme volatility, which has led to some heart-stopping reversals in recent years.

Gold rose to an all-time high for a second straight day on April 6 as the dollar fell to a 14-month low against the euro ahead of an expected interest rate hike from the European Central Bank (ECB).

Spot gold hit a record $1,461.91 an ounce before easing to $1,458.90 an ounce, up 0.6 per cent, US gold futures for June delivery settled up 0.4 per cent to $1,458.50. Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce set in 1980 as a result of heightened geopolitical pressure and hyperinflation.

Gold was boosted as the euro climbed against the dollar to its highest in more than a year. The ECB was widely expected to raise its benchmark rate 25 basis points on April 7, its first hike since the global economic crisis three years ago.

Higher interest rates usually weigh on gold, but the metal could gain if rate differentials weaken the dollar.

Meanwhile, reflecting the pick-up in investors demand for gold was the first inflow of metal into the SPDR Gold Trust, the world’s largest exchange-traded fund, since March 16.

Holdings of silver in the world’s largest ETF, the iShares Silver Trust are at a record 11,162.45 tonnes, having risen by more than 240 tonnes so far this year.

Silver has reaped the benefits of investor demand for safe-haven assets and protection from inflation and on April 06 rose to its highest level since January 1980.

Gold hit a fresh record high near $1,465 an ounce on April 07 after European Central Bank president Jean Claude Trichet indicated the rate hike announced by the bank earlier may not be the first in a series.

Gold tends to suffer in a rising interest rate environment, as this raises the opportunity cost of holding non-interest bearing bullion. Expectations for a rise in euro zone rates kept a lid on gold’s rally to record highs earlier this year.

Copper

IN the London market, copper reached its highest in about two weeks on April 7, supported by bullish comments from a key copper conference in Santiago, while tin closed in on record highs.

Copper for three-months delivery CMCU3 on the London Metal Exchange traded up 1 per cent at $9,700.50 a tonne at 0925 from close of $9,605 on April 6. Mining companies attending the CRU world copper conference in Chile made upbeat comments about prospects for the metal.

Prices are up some eight per cent from mid-March, when they dipped just below $9,000 a tonne. They are now 5 per cent off a record high of $10,190 hit in mid-February.

Copper has risen, supported by non-US investors as the euro hit its highest in more than a year versus the dollar and on prospects of better commodity imports date from top consumer China.

The market expected China’s copper, iron ore and coal imports in March to rebound, with March shipments of refined copper expected to rise from February’s 27-month low.

Aluminium rose to $2,685 a tonne, its highest since September 2008. It later closed at $2,670 versus April 5 $2,641 close, partly lifted by strong energy prices. Energy accounts for about 40 per cant of the cost of producing aluminium. Open interest on aluminium LME contracts are near their highest since the middle of January. Aluminium was later at $2,656 per tone.

Latest data showed inventories of the metal in LME warehouses were down 4,175 tonnes at 4,589,000, but remained consistently high and within reach of a record high 4,640,750 tonnes hit in January last year.

Tin CMSN3 hit a session high of $32,790, just 9 dollars of a record peak scored in mid-February. The metal later traded at $32,570 a tonne from a close of $32,100.

Keeping optimism about nearby demand in check, copper inventories MCU-STOCKS at LME warehouses rose 1,500 tonnes to total 442,375 tonnes, at their highest since early July after rising steadily since December.

Recent weakness in the dollar has supported metals by attracting non-US investors.

Aluminium CMAL3 traded at $2,687 a tonne from $2,670 and zinc CMZN3 was at $2,456 a tonne from $2,450.

Copper reached its highest price levels in about two weeks on April 07 after Portugal announced it would accept a bailout from the European Commission, but then pared some gains as a new earthquake hit Japan. Copper for three-month delivery on the London Metal Exchange (LME) closed at $9,670 a tonne, from a close of $9,605 on April 06. It hit a two-week high at $9,753 a tonne as markets welcomed debt-ridden Portugal’s announcement it would make a formal request for European aid.

Pakistani Rice Exports Down On Year

According to the recent rice exports statistics released by the government of Pakistan, the country's total rice export has crossed 2.734 million MT mark during nine months of current fiscal year, showing a decline of 772,928 MT over last year’s 3.314 million MT.

The export of Basmati rice has surged by 14 % in volume to 786,902 MT and 12 % in value to $ 655.606 million during nine months of 2010-2011. However, there is a decline of 26% in the export of non-Basmati rice in volume to 1.947 million MT while the value also dropped by 18% to $ 851.840 million.

PAKISTAN: 25 Million MT Wheat in 2010-11

ISLAMABAD: Pakistan is expected to produce at least 25 million tonnes of wheat in its 2010/11 crop, Finance Minister Hafiz Shaikh said on Friday, higher than the initial estimate.

“We are expecting that our wheat crop this year will cross 25 million tonnes,” he told reporters.

Industry officials had earlier feared the output would fall to 23.5 million tonnes against a target 25 million tonnes, after a decline in the area under wheat cultivation because of massive floods in 2010 and fertiliser shortages.

A food ministry official said good output was expected because of increased fertility in wheat-growing areas after the floods.

Pakistan produced a bumper crop of 23.8 million tonnes of wheat last year. The country consumes about 22 million tonnes a year. Harvesting of the 2010/11 crop is underway.

Asia’s third-largest wheat producer, Pakistan resumed wheat exports in January for the first time in three years after the government lifted a ban in December.

The three-year ban was lifted when the 2009/10 crop and carryover from the previous stocks led to market surplus.

Traders earlier hoped to export up to three million tones of wheat this year, but the quantity may now exceed that following new wheat output estimates.

The country had already exported or contracted to sell about 1.5 million tonnes of wheat so far.

Reserves slip to $17.64bn

KARACHI, April 7: Pakistan`s foreign exchange reserves eased to $17.64 billion in the week ending on April 2, from a record $17.95 billion the previous week, a senior central bank official said on Thursday.

Reserves held by the State Bank of Pakistan (SBP) fell to $14.26 billion from $14.54 billion a week ago while those held by commercial banks eased to $3.38 billion from $3.41 billion, said SBP chief spokesman Syed Wasimuddin.

“The decline in reserves during the week is due to scheduled debt repayments,” said Wasimuddin.

Pakistan`s forex reserves have grown steadily thanks to higher export proceeds as well as record inflow of remittances.

Remittances rose by 20 per cent to $6.96 billion in the first eight months of the 2010-11 (July-June) fiscal year, compared to the same period the previous year, according to central bank data.

Foreign exchange reserves were boosted in January by more than $633 million when the US provided funds.

In May 2010, Pakistan received $1.13 billion in the fifth tranche of an $11 billion International Monetary Fund (IMF) bailout programme.

An IMF mission was in Pakistan last month to conduct a review of the country`s economy.

Will Japan’s tsunami wave hit Pakistani shores?

WILL the tsunami waves unleashed by the giant 9.0 earthquake in Japan reach Pakistani shores? Not in the literal sense. The waves died out quickly doing little physical damage outside Japan. But they produced another kind of turbulence that will surely affect Pakistan as the viability of the atom as the source of electric power begins to be questioned once again.

Pakistan facing a serious power crisis that has already taken a heavy economic toll was depending on the development of nuclear power to increase generation and thus close the severe demand-supply gap that has proved to be so difficult to overcome. Of the three domestic sources of energy available, one (gas) is being rapidly exhausted, the second (hydro) is proving difficult to exploit for political reasons, and the third (coal) faces numerous environmental problems.

Nuclear energy seemed like a good option until recently when the 40-year old reactor at Fukushima was hit by the earthquake and inundated by the tsunami waves. It had to be shut down. How much health damage it has done to the Japanese who came in the way of the radiation produced by the troubled reactor will not be known for years. What is known is that the viability of nuclear power is being questioned all over the globe. This has happened before.

After the “Three Mile” accident to a reactor in the United States (it happened in 1979) development of nuclear power for civilian use was slowed down. Confidence had begun to return when Chernobyl happened in the Soviet Union in 1986. The Russian accident was much more serious as was its impact on the development of the nuclear industry.

The medium to long-term impact on the future of the nuclear energy will depend on two things. First, how fast cooler and more rational heads prevail over those who are currently in a state of hysteria. The first reaction came from conservative countries such as Germany that ordered that seven of its old reactors should be immediately slowed down. Even Beijing temporarily suspended the approval of new nuclear reactors.

In this environment it was not easy to point out by those who look at the environmental advantage, that even under the worst case scenario, the number of deaths from Fukushima will be less than the lives lost every year because of the health problems caused by coal-fired electric plants. Coal mining accidents killed 2,400 people in China alone.

For Pakistan, the only silver lining visible in this very dark cloud is that it had turned to China as a supplier of nuclear energy. Chinese built reactors are already operational at Chasma and more are on the drawing board. During one of the many visits President Asif Ali Zardari has paid to China, the two countries signed a memorandum of understanding which, if fully implemented, will have nuclear power become a major source of energy supply.

The silver lining in the dependence on China is for the fact that for all the countries exporting nuclear technology, China appears to be the most advanced in terms of making the science and engineering behind the reactors safer than it is today.

The new technology being developed in China will be used in two reactors on a peninsula jutting into the Yellow Sea. The authorities are confident enough that this will be a much safer way of producing nuclear power than turned out to be the case in Fukushima-Daiichi types of machines. The crippled Japanese reactor used tightly packed fuel rod assemblies each with about 180 kilograms of uranium.

These packages were generally cooled by water and once the fuel was spent they were kept for hundreds of years at what were considered to be safe sights. The design used by the Japanese at Fukushima had two defects that were not present in later reactors. The back-up generators used for pumping water into the reactor were located in the basement and therefore easily inundated once the tsunami water rushed in at great speed. The second problem was that the spent fuel was stored on top of the building which made it exceptionally vulnerable if the building itself got compromised.

The Shidao plants are being built by the state-owned Huaneng Group, the biggest Chinese electric company. It will attempt to prove that the technology can work on a commercial scale. Each plant can meet the power needs of cities with population of 75,000 to 100,000 people at the United State’s level of consumption.

The new Chinese design uses small uranium balls rather than rods as the core of the reactor. Thousands of balls will be used, each with its own graphite packing which will prevent radiation from leaking even in the case of a malfunction. The reactors will also be cooled by a non-explosive helium gas instead of relying on a steady flow of water.

The technology behind the new reactors has been known for a while. Called the pebble-bed reactor approach it was experimented with by Germany, South Africa and the United States but was not developed. It was a costly machine. However, there is virtual consensus among nuclear experts that the technology works better than the conventional one and produces more manageable waste. The spent balls are considerably less radio-active than the rods and can be disposed off in the sites near the plants. The experiments outside China were not continued since the private sector was not prepared to outlay a large amount of capital that may ultimately not yield economic results. Financially rich China has taken care of this problem by coming in with massive support. The government has paid for the entire research and development bill and will pay an additional 30 per cent as subsidy for the capital cost of building the plants.

China now has the world’s largest nuclear reactor building plans in the world. As many as 50 new reactors will be built, mostly of the conventional design. But if the pebble-bed approach works a larger proportion of the plants will be of the new variety. Western opinion about the Chinese approach is generally positive.

“China epitomises the stark choices that we face globally in moving away from current forms of coal-based electricity”, says Jonathan Sinton, the top China specialist at the International Energy Agency in Paris. “Nuclear is an essential alternative to coal. It’s the only one that can provide the same quality of electricity at a similar scale in the medium and long-term”.

While locating the new plants the Chinese are being cautious, having fully imbibed the lessons from the Three Mile and Fukushima accidents. The authorities have ordered that all nuclear plants be located at least 50 kilometers from the nearest city. Chinese nuclear safety agency met after the incident in Japan and reviewed the Shidao plant design as well as its siting. They have given the go-ahead for construction work to proceed.

Since one is not privy to the on-going discussions between China and Pakistan on the nature of the former’s promised assistance to the latter, it would be prudent for Pakistan’s Atomic Energy Commission to look again and with considerable care at the programme of Chinese assistance.

It would be wise to include one of the pebble-bed reactors among those headed eventually Pakistan’s way. Joining the Chinese even at the experimental stage of the development of this breed of reactors would help the Pakistani engineers and scientists to gain enormous valuable experience.