By Staff Reporter
ISLAMABAD: Pakistan’s Petroleum Division on Saturday notified an amended policy for its brownfield refineries, offering them fiscal incentives to upgrade their facilities and produce cleaner fuels, according to an official document.
The policy, which was approved by the cabinet last month, aims to reduce the country’s reliance on imported petroleum products and improve its environmental standards.
The policy envisages a minimum customs duty or regulatory duty of 10 percent for a period of seven years from the date of notification on motor gasoline and diesel imported in the country. Any customs duty imposed over 10 percent and reflected in the ex-refinery price will be deposited in a pool fund for inland freight equalization margin (IFEM).
In case any refinery is not eligible to avail of the incentives provided in this policy, it will be bound to deposit the same in IFEM. Any customs duty on crude oil shall be reimbursed to refineries through IFEM, the document states.
The policy also allows the refineries to enjoy a 10 percent tariff protection or deemed duty on motor gasoline and diesel’s ex-refinery price for seven years from the date of signing an upgrade agreement and opening of the joint Escrow Account with the Oil & Gas Regulatory Authority (OGRA) within 60 days of notification of amendments in the policy.
“However, 2.5 percent of the deemed duty on diesel and 10 percent on motor gasoline (incremental incentive), shall be deposited by refineries in the Escrow Account maintained by OGRA and the respective refinery jointly in National Bank of Pakistan for utilization of upgrade projects only,” the document said.
Until the opening of the said account, the incremental incentive shall be deposited in the IFEM. The prevailing 7.5 percent deemed duty on HSD for sustainability shall continue after the seven years incentive period for 20 years or till deregulation, whichever is earlier.
For an existing refinery to be eligible for the fiscal incentives provided in this policy, it shall within 60 days after the notification of amendment in this policy, execute a legally binding upgrade agreement with OGRA.
The policy suggests that a refinery defaulting on any government dues/petroleum levy on petroleum products would not be eligible to avail of this policy until a legally binding and enforceable (with a recourse) settlement is reached with the government of Pakistan.
Till such time, the defaulting refinery will deposit the incremental incentives into the IFEM pool. Once a settlement is reached with the GOP, the refinery will become eligible to sign the upgrade agreement and open a joint escrow account with OGRA and start depositing the incremental incentives on a prospective basis.
Pakistan Refinery Limited (PRL) has already executed the upgradation agreements with OGRA and official sources said, three out of four refineries in the country will not face any hurdle in executing the upgrade agreements urgently, but Cnergyico, which has defaulted on a petroleum levy of Rs47.5 billion, is in the process of settling the amount and may take time if its deed of settlement is not approved early by the finance division
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