The federal government on Friday approved to slash subsidies and increased edible oil prices at utility stores by nearly 18% with immediate effect and agreed to reduce the income tax on telephone calls by 20% from July.

The Economic Coordination Committee (ECC) of the cabinet that took these decisions also approved to abolish 10 paisa per unit electricity surcharge that had been imposed to raise funds for 969 megawatts Neelum Jhelum hydropower project. Federal Minister for Finance Dr Abdul Hafeez Shaikh chaired the meeting.

The ECC approved to increase the edible oil prices by Rs30 per kilogram to Rs200, according to an official of the Ministry of Industries.

In a handout, the Ministry of Finance said that the Ministry of Industries and Production presented a summary before ECC regarding revision of subsidised prices of essential commodities by the Utility Stores Corporation of Pakistan.

The industries secretary presented various proposals to rationalise prices of wheat flour, sugar and ghee in view of continuous fluctuations in international commodity prices, said the finance ministry.

“The ECC approved only partial rationalisation and directed to provide maximum relief to the consumers despite significant price differential between subsidised price offered by the USCs and the prevailing prices in the domestic markets,” it added.

The ECC decided that the prices of sugar, rice wheat and its flour would be maintained and the subsidies will be given under the Ramzan Relief Package.

In February last year, the federal cabinet had directed USC to maintain the prices of flour at Rs800 per 20 kg, sugar at Rs68 per kg, edible oil at Rs170 per kg, rice Rs15 to 20 per kg less than the market and pulses  Rs15 to 20 per kg less than the market.

The ECC also approved another summary by the Ministry of Industries and Production for outstanding payment to Ocean Wide Shipping Services, amounting to $580,000 from Pakistan Steel Mills to fulfil a contractual obligation for transportation of coal during the year 2010.

After discussing multiple times and grilling by the prime minister in the cabinet, the ECC finally approved lowering taxes for the telecom sector.

The Ministry of Information Technology had submitted these proposals. Against the IT ministry’s proposal to abolish 12.5% withholding tax on mobile calls, the ECC approved to reduce it to 10% from July.

The ECC did not accept the proposal to reduce the minimum tax from 8% to 3%. The ECC also approved to reduce federal excise duty rate from 17% to 16% and also agreed to abolish the Rs250 SIM card activation charges.

In May last year, Prime Minister Imran Khan had constituted an inter-ministerial committee to deliberate on tax issues related to the telecom sector with a view to facilitating the delivery of online education and healthcare services.

The ECC considered a summary by the Ministry of Energy regarding tax on payments to the offshore supply contractor to meet the contractual obligation.

The ECC established a sub-committee comprising SAPM on Petroleum, Law Division secretary, Power Division secretary and the Federal Board of Revenue (FBR) with a direction to evaluate the proposal and present workable recommendations before the forum for consideration.

The cabinet body approved to abolish Neelum-Jhelum surcharge, which the government was collecting at the rate of 10 paisa per unit through the monthly electricity bills.

The Neelum-Jhelum project has been operational since long but the government was still collecting the money from the consumers.

The ECC also approved to change the disbursement mechanism for giving subsidies on fertiliser for the next crop season. It was decided that the Rs40 billion would be given to the provinces on the basis of fertiliser off take.

The provinces would certify the federal government about the transparent use of the subsidies.

The Rs50 billion subsidies had been earmarked for the agriculture sector under the prime minister’s fiscal package for agriculture in the backdrop of Covid-19 pandemic.

However, the money remained unspent due to lack of clarity on the disbursement mechanisms.

The ECC also approved a summary regarding government’s sovereign guarantee for a PSDP project titled National Electronics Complex of Pakistan (NECOP), executed by National Engineering and Scientific Commission.

The cabinet body also cleared various supplementary grants. It approved Rs550 million for Special Communications Organization (SCO) from the Ministry of Information and Technology budget during the FY2020-21. The Rs200 million were approved for Special Technology Zones (STZA) during the current financial year.

An amount of Rs109 million was given to Ministry of Information and Broadcasting (MOIB) to clear outstanding Bills related to media campaigns on behalf of Ehsaas Program during the last fiscal year.