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ISLAMABAD: Out of sheer luck, Pakistan-owned Roosevelt Hotel has attracted a three-year rental offer for its 1,025 rooms from the New York City Government (NYCG) envisaging about $18 million in net cash flows instead of incurring over $160m carrying cost for the same period.
The Economic Coordination Committee (ECC) of the Cabinet on Friday approved the offer in principle and constituted a four-member committee to negotiate the agreement with NYCG and the hotel’s worker union.
The meeting of the ECC presided over by Finance Minister Ishaq Dar also allowed up to 20 per cent increase in the prices of more than 150 essential and other medicines and approved Rs1.164 trillion worth of Cash Credit Limit (CCL) for Punjab and Sindh governments for procurement of about 5 million tonnes of wheat in the public sector.
Drug prices
The Ministry of National Health Services, Regulations and Coordination presented a summary of the increase in maximum retail prices (MRPs) of drugs based on the recommendations of the Policy Board of Drugs Regulatory Authority of Pakistan (DRAP) in the wake of rupee depreciation and inflation.
The pharmaceutical industry had been demanding an across-the-board increase of 38.5pc in the MRPs of all registered drugs and biologicals as envisaged under the Drug Policy 2018. Owing to delays, the industry had taken the matter to the courts. Through negotiations, the two sides reached an agreement that was approved by the ECC to ensure the continuous availability of drugs in the market.
Under the agreement, the ECC, as a one-time dispensation, allowed manufacturers and importers to increase their existing MRPs of essential drugs equal to 70pc increase in CPI (with a cap of 14pc) and MRPs of all other drugs and lower priced drugs an increase upto 70pc in CPI (with a cap of 20pc) based on average CPI for current year i.e July 1 to April 1 with condition that it should be considered as an annual increase for the financial year 2023-24 and no increase under this category will be granted in next financial year.
The ECC further advised the Policy Board of DRAP to review the situation after three months i.e. in July and make its recommendations to the federal government regarding price decrease if the rupee appreciates.
Roosevelt Hotel
The ECC was informed that while the Aviation Division and Pakistan International Airline-Investment Ltd (PIA-IL) were working on a business plan under directives of the government for re-opening of Manhattan’s prime property through renovation and severance cost with the hotel’s worker union, the New York City offered to utilise the building’s 1,025 rooms for three years to house immigrants at the rate of $200 per day for 36 months.
The offer envisaged a 14-month guaranteed period along with a four-month termination notice period (minimum of 18 months). The contract is to commence on May 15 and entails a per-night rent of $200 for the first year, $205 for the second year and $210 for the third year. New York City will cover the taxes etc and make a payment of $1.74m monthly rent on the first of each month in advance.
The meeting was informed that this would help the payment of dues to the staff union which was cooperating with the deal settlement and provide a three-year net cash flow of $18.8m to the PIA-IL at the rate of $7.4m in the first year, $5.3m in the second year and $6.1m in the third year.
PIA-IL has to hand over about 500 rooms to New York City immediately i.e. on the commencement of the contract on May 15, followed by 400 more rooms within 30 days and the remaining 125 rooms later. This required $1.145m for re-opening works and was already available with PIA-IL as a government grant.
The meeting was also informed that two other options under the business plan envisaged a three-year carrying cost of about $160m on ‘as is where is’ basis or $132m of financial obligations in case of gradual renovation and revival of the hotel business.
The ECC after discussion approved the recommendations of the Ministry of Aviation and approved the formation of a four-member negotiating committee led by the Secretary Aviation Division to negotiate with the New York City Government and the hotel union.
The ECC also allowed PIA-IL/RHC (Roosevelt Hotel Co) to utilise the funds of $ 1.145m from the available balance as bridge financing to commence the re-opening work at the hotel.
Wheat procurement
The ECC also approved Rs1.164tr CCL for procurement of about five million tonnes of wheat by the provinces who would bear themselves incidental charges to retain wheat crop 2023-24 at the rate of Rs918 per 40kg.
This includes the procurement of 1.4m tonnes of wheat by the Sindh government at the rate of Rs4,000 per 40 kg involving CCL of Rs214bn -– Rs140bn for the purchase of wheat and Rs74bn to be utilised on the bank’s borrowing charges.
Likewise, the Punjab government would procure 3.5m tonnes of wheat at the rate of Rs3,900 per 40kg involving CCL of Rs950bn – Rs343.5bn for the purchase of local wheat and the remaining Rs607bn on account of borrowing charges and cushion amount. The Balochistan government would procure 100,000 tonnes of wheat at the rate of Rs3,900 per 40 kg but did not seek CCL.
The ECC also approved Rs35m additional funds to the Ministry of Interior for the establishment of Passport Processing Centres at the Tehsil level in 30 administrative units throughout the country. Another Rs450m for the operational requirements of ICT police for its liabilities and training of fresh recruits.