As Afghanistan is lobbying for duty-free oil imports, the Ministry of Petroleum and Natural Resources has turned down the demand of Kabul, saying it will have to pay all duties applicable to petroleum products in Pakistan.
The demand has been rejected as authorities fear that the Afghan government will provide oil to Nato forces fighting the Taliban and Al-Qaeda in Afghanistan. Pakistan has suspended supply of goods, including oil, to Nato forces due to a stand-off with the US since attacks on two Salala checkposts on November 26 last year in which 24 soldiers died.
Since 2002, the country had been supplying petroleum products to Nato forces, exempted from all duties including general sales tax and petroleum levy. Supplies were made through the US Defence Energy Supply Company.
In December 2011, the Economic Coordination Committee (ECC) approved withdrawal of all tax and duty exemptions on export of petroleum products to Afghanistan. The petroleum ministry told the ECC that ground realities were quite different as imports were being made only on papers and all these petroleum products ended up being sold in Pakistan after going through the export process.
“We have conveyed to the commerce ministry that the Afghan government will have to pay all duties applicable to petroleum products in Pakistan if it wants to import oil,” a senior official of the petroleum ministry said.
According to the official, tankers transporting oil to Afghanistan have destroyed roads in Pakistan, necessitating the need for slapping taxes on supply of petroleum products.
Export of high-speed diesel (HSD) and petrol produced by domestic oil refineries to Afghanistan is banned.
“We have also told the commerce ministry that the Afghan government will have to pay all taxes even on imported petroleum products,” the official added.
As the country has a surplus stock of jet fuel, Afghanistan may be allowed to import it but it will have to pay duties to cover the cost of infrastructure used to transport the fuel to Afghanistan.
Pakistan has been supplying around 850,000 tons of imported jet fuel to Afghanistan per year. The country has also exported 150,000 tons of high-speed diesel and 100,000 tones of petrol per year since 2002-03 at subsidised rates.
Exporters have also approached the petroleum ministry, pressing it to lift the ban on oil export. They claim that they are bringing foreign exchange and therefore export of locally produced petroleum products should be allowed.
Published in The Express Tribune, March 18th, 2012.