Cabinet Decides a hike in Spending Limit for Refineries Upgradation Projects

By Omed Hajjana

The cabinet has decided to raise capping of spending for refineries’ upgradation projects to compensate the loss of dropping custom duty’s waiver on equipment.

Sources said that cabinet had decided that there would be no waiver of custom duty on import of equipment meant for upgradation projects for refineries.

Howeever, the cabinet decided to raise capping of spending from 25 percent.

“The raise may be 2 to 3 percent which means that refineries will be allowed to spend 27 to 28 percent out of incremental revenue,” sources said.

Earlier, the committee on energy (CCoE) had approved incentives for existing refineries, unveiling $1 billion support for up-gradation projects under new refinery policy.

Prime Minister Shahbaz Sharif chaired the meeting.

The government would give 10 percent deemed duty on petrol and 2.5 per cent additional deemed duty on diesel.

This will double the local production of these two products.

The policy is six years and diesel production will go up by 100 percent.

The refineries are currently receiving 7.5 percent deemed duty on diesel.

They will get 10 percent deemed duty on diesel now with a hike of 2.5 %.

It had also approved a cap of 25 percent of total collection amounting to consume on up-gradation plants out of incremental revenue.

The money collected on account of deemed duty would be deposited into Escrow Account.

The account will be jointly monitored by refineries and oil and gas regulatory authority (Ogra).

The refineries have totally estimated $4 to$ 5 billion spending on up-gradation projects.

The government will allow 25 percent worth $1 billion spending out of total collection on up-gradation projects.

Refineries are currently producing 50 percent of total demand in the country.

This production will be doubled to 100 percent in next six years.Refineries Policy: No import duties, sales tax on crude import

The production of petrol would jump up to 60 percent of total demand.

The country will save $600 million annually on account of foreign exchange. There will be total benefit of $1.2 billion in two years.

The refineries will submit undertaking to petroleum division to start up-gradation projects. The Ogra will monitor the activities.

Incentives will be suspended if any refinery fail to fulfill commitment.