Staff Report
ISLAMABAD:
The Petroleum division has been finalizing incentives for the refineries and the upcoming Cabinet Committee on Energy (CCoE) meeting would be asked to take an important decision in this regard
Reliable sources said that petroleum division will present a summary during the next CCoE to ensure incentives for the refineries of the country and the CCoE will take decision in this regard. On
Sources said that the petroleum division on 11th October had succeeded to develop consensus regarding future incentives among the stakeholder including managing directors (MDs) and Chief Executive Officers (CEOs) of the five refineries during a meeting.
“The petroleum division is preparing a summary to seek incentives capped at 30 instead of the previous 40% of the project cost, while 10% tariff protection for the existing refineries on motor gasoline and diesel with the construction of up-gradation projects before December 31, 2025.” said sources.
They added that Petroleum division is likely to abolish a 10 year tax holiday incentive for existing refineries only etc.
Available draft of new oil refinery policy 2021disclosed to NewsLite that there will be tariff protection in the form of 10percent import duty on motor gasoline and diesel of all grades and imports of any other white product used for fuel for any motor or engine while it will be effective from the date of the commission for six years, provided that the refinery starts construction of the project before December 31, 2025. Similarly, there will be no import duties and sales tax on import of petroleum crude oil with effect from July 1, 2022, being the primary raw material. However, the finished products shall be subject to import duties and Sales Tax notified by the competent authority from time to time.
It is also learnt from draft Pakistan Oil Refining Policy 2021 that the government would give the pricing regime for new refinery projects a pricing mechanism that shall be no less favorable than the prevailing mechanism till deregulation.
The product pricing formula of refineries will be based on “True Import Parity Price” to be derived from Arab Gulf Mean FOB spot price, or if not published, shall be derived from Singapore Mean FOB price.
The government will add all other elements, including Premium, Freight, Port Charges, Incidentals, Import Duties, exchange rate, provincial taxes as applicable, and different price adjustments as per PSO actual imports, in the FOB price arrive at True Import Parity Price.
Additionally, prevalent Inland Freight of imported crude oil to refineries and provincial duties, levies/cess, and taxes (with import duty on crude oil, if any) at the import of crude oil shall be added for refineries.
It is pertinent to mention that the CCoE had earlier approved in principle the Oil Refinery Policy 2021 and it (CCoE) had raised serious concerns over the proposed incentives for the refineries. Similarly, the CCoE also questioned the use of incremental revenue, utilisation of deemed duty by refineries and the collection of revenue and its utilisation if the government allowed 10 percent tariff protection. Furthermore, the CCoE directed the Petroleum Division to revisit the proposed incentive package.
