Govt on path of conducting refineries’ deemed duty audit

Ibn-e-Ameer

Islamabad: Amid conflicting figures of deemed duty, the government is moving towards conducting an audit of the deemed duty oil refineries have collected in Pakistan for their up-gradation projects. Oil refineries have pocketed billion on account of deemed duty in Pakistan for up-gradation projects.

The cabinet committee on Transport and Logistics (CCoTL) has unanimously recommended the petroleum division to carry out an audit of the deemed duty oil refineries had collected in Pakistan for up-gradation projects.

The petroleum division in a recent report submitted to the cabinet committee on energy (CCoE) has informed oil refineries had collected Rs 200 billion.

However, it further added that oil refineries had invested the same amount of Rs 200 billion on different projects.

The senate standing committee on petroleum had noted in September 2018 that oil refineries had pocketed Rs500 billion from consumers on account of deemed duty.

This amount was an incentive government had provided for upgrading their plants to produce higher-grade and environment-friendly fuel.

Oil refineries continue collecting deemed duty since 2002 in the Musharaff government on the sale of petroleum products to set up upgraded plants for oil refining.

They had an extension in deemed duty collection four times. They had also missed deadlines of upgrading projects. Now, they were on the path to receiving another bailout package.

They are currently collecting 7.5% deemed duty on the sale of high-speed diesel to the consumers.

Now, the government is set to grant another 10 % tariff protection to oil refineries to set up up-gradation plants to produce friendly fuel.

Economic Coordination Committee (ECC) had taken a decision in March 2013 that refineries will deposit their profits over 50% of the paid-up capital including the accumulated unutilized balance in a special reserve account.

These refineries included National Refinery Limited, Pakistan Refinery Limited, and Attock Refinery Limited.

But these refineries had not deposited a single penny in the escrow account. Rather, they claimed that they shifted funds to meet their losses.

The previous government had extended the date of deemed duty and enhanced the rate of deemed duty from 7.4% to 9% on high-speed diesel for oil refineries in Pakistan. It also extended the date for completion of the upgrade process to December 2015 from July 2014.

However, the PML-N government had made it conditional that the finance ministry would open a joint Escrow account with oil refineries to deposit 50% of paid-up capital to set up modernization plants.

It had also provided another incentive like deregulation of prices of petroleum products while linking with the actual import price.

Critics of refineries say that refineries had received extensions in deemed duty several times but they failed to honour their commitments. They did not spend money on up-gradation plants.

Due to their non-compliance with the government’s directives, the past governments had extended deadlines multiple times. The government had asked refineries earlier, to complete plants in 2010. However, refineries got extensions to 2012, then to 2014, and then to 2015.

In July 2002, the government of Musharraf had introduced independent power producers tariff protection formula.

Under this formula, the government had allowed oil refineries 10% deemed duty on HSD and 6% on kerosene, light diesel oil and JP-4 on ex-refinery prices.