Day: January 25, 2022

The 19th Public-Private Partnership Authority (P3A) Board meeting has decided the Karachi Circular Railway (KCR) project to be built on a Public-Private Partnership (PPP) basis, whereby the private sector would be responsible to finance the construction of the Civil Works, Electrical & Mechanical (E&M) components and Operations & Maintenance (O&M) of the project from its resources under a single package contract.

Federal Minister for Planning Development & Special Initiatives, Asad Umar, chaired the 19th Public-Private Partnership Authority (P3A) Board meeting in Islamabad on Tuesday.

The Board reviewed the key statistics and components of the project proposal of KCR, which envisaged the project to be built on a PPP basis, whereby the private sector would be responsible to finance the construction of the Civil Works, Electrical & Mechanical (E&M) component (including procurement of Rolling Stock) and Operations & Maintenance (O&M) of the project from its resources under a single package contract.

The approved Project Proposal/TS entailed the project to be implemented on a BOT–user charge basis and the Government of Pakistan (GOP) to provide Capital and Operational Viability Gap Funding (VGF) in order to improve the financial viability and bankability of the project.

To seek adequate investor interest in the project and to magnify its success prospects, the private sector would also be given Minimum Revenue Guarantee (MRG) for initial operational years and a right to undertake commercial development of the KCR stations to supplement fare and non-fare revenues incidental to the project.

The project aims to provide reliable, safe, and environmentally friendly public transport to the Metropolitan City of Karachi. The project entails the construction of a 43-km dual-track urban rail mass transit system expected to be built in a period of 3 years. The project is expected to serve daily ridership of 4,57,000, which is expected to soar to 1 million per day by the end of the 33-year concession period. The project will deploy the use of electric trains and will be operational for 7 days a week and 17 hours a day.

The project encompasses the construction of 30 stations along the corridor covering densely populated areas of the city. The economic benefits of the project are phenomenal in terms of saving vehicle operating costs, environmental protection, accidents & time savings, contribution towards promoting gender equality, and spill-over tax impact.

The chair of the board, Mr. Asad Umar, while highlighting the importance of the project, said, “the project is an important part of the Karachi Transformation Plan and will play a pivotal role in providing affordable and reliable public transport system to the Karachiites.”

He said that the following approval of the KCR project by the P3A Board, the project appraisal process for the Karachi-Pipri Freight Corridor project should also be completed at the earliest as that project is also critical in terms of easing congestion at the Karachi port.

The project with its transaction structure approved by the P3A Board as mentioned above will be brought to the market after approval by the Executive Committee of the National Economic Council (ECNEC).

Deputy Chairman Planning Commission and Vice-Chairman P3A Board, Dr. Muhammad Jahanzeb Khan, Secretary Finance, Secretary MoPD&SI, Secretary Railways, Member Private Sector Development, Private Sector P3A Board members, and Chief Executive Officer-P3A were among the meeting participants. The meeting was also attended by Member IRC & Implementation Planning Commission, Director-General Debt Office (Finance Division), Chief Economist Planning Commission, and senior officials of the MoPD&SI, P3A, and Pakistan Railways.

Source: Pro Pakistani

Pakistan International Airlines (PIA) has not filed its federal excise duty (FED) and sales tax (ST) returns with the Federal Board of Revenue (FBR) in two years.

According to documents available with ProPakistani, the state-owned carrier has been a non-filer of FED and ST returns since December 2020 and owes billions to the tax machinery.

The national flag carrier owes taxes to the tune of Rs. 26.157 billion to the FBR, of which Rs. 7.982 billion has been deferred by the Federal Cabinet’s Economic Coordination Committee (ECC). Regardless, it was discovered that no-stay orders totaling Rs. 16.045 billion remain unrecovered and have been increasing since 2017.

Sources privy to the matter revealed that the FBR had frozen PIA’s bank accounts for non-payment of federal excise duty on tickets for the last two years. It maintains that the flag carrier had to pay Rs. 4.5 billion FED on the tickets it collected for the last two years. A total of 53 PIA accounts have been frozen to make the recoveries, the FBR added. The tax machinery has recovered Rs. 465 million so far, and the accounts will remain frozen until the retrieval of another Rs. 4.135 billion.

It is noteworthy that since the PIA is a public entity, the government has the right to book adjustments of all the liabilities in any way that is pursuant to the existing regulations. It is expected that, when recovered, the payable amount will be reflected in the FBR’s upcoming revenue collection target.

Source: Pro Pakistani

The Pakistani Rupee (PKR) is on a persistent losing streak against the US Dollar (USD) and posted losses in the interbank market today. It lost 22 paisas against the greenback after hitting an intra-day high of Rs. 176.25 against the USD during today’s open market session.

It depreciated by 0.13 percent against the USD and closed at Rs. 176.72 today after losing 25 paisas and closing at 176.49 in the interbank market on Monday, 24 January.

The rupee reported losses against the dollar for the second consecutive day despite the State Bank of Pakistan’s (SBP) unchanged policy rate. Its Monetary Policy Committee (MPC) decided on Monday to keep the policy rate unchanged at 9.75 percent due to certain factors, including the current account deficit and headline inflation which appear to have stopped growing drastically in the last two months.

In a statement, the MPC remarked, “While year-on-year headline inflation is high and will likely remain so in the near term due to base effects and energy prices, the momentum in inflation has slowed with month-on-month inflation flat in December compared to a significant rise of 3 percent in November. Inflation expectations of businesses have also declined considerably.”

Discussing the rupee’s near-term outlook earlier in the day, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, commented on Twitter that even though the policy rate is unchanged, the SBP seems pleased with the current fiscal and monetary policy mix. However, he warned that factors like oil prices and the current account deficit could impede progress.

The PKR notably reversed its gains against some of the other major currencies and reported losses in the interbank currency market today. It lost six paisas against both the Saudi Riyal (SAR) and the UAE Dirham (AED) in today’s interbank currency market.

Conversely, it gained 33 paisas against the Australian Dollar (AUD), 57 paisas against the Canadian Dollar (CAD), 82 paisas against the Pound Sterling (GBP), and nine paisas against the Euro (EUR).

Source: Pro Pakistani

The government has decided to ban people convicted for criminal offenses from holding ownership of or positions in Designated Non-Financial Business and Professions (DNFBPs), in compliance with the Financial Action Task Force’s (FATF) conditions.

According to the FATF, real estate developers and agents, precious stones dealers, law firms, accounting firms, audit firms or insolvency firms, and company service providers fall in the category of DNFBPs.

Pakistan deals with DNFBPs through the Anti-Money Laundering and Countering Financing of Terrorism Regulations in the country. In this regard, the Federal Board of Revenue (FBR) has decided to closely monitor any changes in the ownership and positioning of the DNFBP’s structures. It has also directed the DNFBPs to prevent convicts from entering these professions.

The notification issued by FBR read: “Every DNFBP shall ensure that it has measures in place to prevent any person who has been convicted of a criminal offence or any associate of such a person from holding any ownership or controlling interest in the DNFBP, being the beneficial owner of the DNFBP and holding any senior management or board position in the DNFBP.”

It continued: “Every DNFBP shall notify the FBR when there is a change in any ownership or controlling interest in the DNFBP, any beneficial owner of the DNFBP and any senior management or board position in the DNFBP”.

The government had previously also banned convicted persons from becoming shipping agents. It seems to be tightening its reins around convicts to restrict them from obtaining any decision-making positions and the execution of decisions.

Source: Pro Pakistani

Honda Atlas Cars Pakistan Ltd. (HCAR) has announced its financial results for the third quarter that ended December 31, 2021.

In a notification to the Pakistan Stock Exchange, the company has reported a profit of Rs. 445.94 million during the third quarter down by 41 percent as compared to the same period of the previous financial year when it reported a profit of Rs. 751.80 million.

According to a report by Topline Securities, the earnings of the company remained lower than expectations primarily due to lower-than-expected gross margins.

During the first nine months, the profits of the company grew by 157 percent to Rs. 2.31 billion compared to Rs. 897.65 million during the same period of the previous financial year.

During this quarter, the company increased by 67.50 percent to Rs. 29.53 billion as compared to b sales of Rs. 17.64 billion recorded in the same period last year, with multiple price hikes. The cost of sales was reported at Rs. 28.73 billion, up by 74.25 percent compared to Rs. 16.49 billion in the same period of the previous financial year. This took the gross profits to Rs. 800 million, down by 30.45 percent compared to Rs. 1.15 billion in the same period of the previous financial year.

According to Topline Securities, the earnings were lower due to lower gross margins which clocked in at 2.7 percent in 3QMY22, down from 6.5 percent in 3QMY21 and 6.9 percent in 2QMY22. This is lower than the last 12-month average gross margins of 6.6 percent due to the lagged impact of rupee devaluation, freight charges and higher inventory costs.

Total car sales of Honda increased by 66.52 percent to 10,376 units in 3QMY22 compared to 6,231 units in the same period last year. This was primarily driven by the launch of the new model of Honda City, macro recovery and low base effect.

The other income of the company increased by 117 percent during the quarter to Rs. 530 million as compared to Rs. 244 million in the same period last year due to improved advances from the customers, higher cash and cash equivalents.

Distribution and marketing costs increased by 102 percent in the period under review to Rs. 181.25 million compared to Rs. 89.90 million in the same period last year. Administrative expenses increased to Rs. 246 million compared to Rs. 206 million in the same period last year.

The financing cost of the company decreased by 52 percent to Rs. 16.14 million in the period under review as compared to Rs. 33.37 million in the same period last year.

Earnings per share of the company in 3QMY22 were reported at Rs. 3.12 compared to Rs. 5.26 in the same period last year.

What Lies Ahead?

HCAR witnessed a significant rise in sales in the third and final quarter of the 2021 calendar year with the launch of the 6th generation City.

However, the decline in profit margins occurred due to the rise in raw material costs, freight charges, depreciation of the Pakistani Rupee against the US Dollar, and other production-related hiccups around the end of the previous year.

Also, with the enforcement of revised Federal Excise Duty (FED) and sales tax rates, the import costs for the Completely Knocked-Down (CKD) kits have also increased, prompting all automakers to announce massive price hikes twice within the past three months.

Although, with further increase in the operational costs expected in 2022 due to the ongoing supply-chain and economy concerns, it is safe to say that more price hikes are on the way, which are likely to impact HCAR’s performance in the next quarter as well.

Source: Pro Pakistani