Pakistan has shelved plans to import petrol, diesel and all other petroleum products from India till 2014 due to difference in product specifications used in both countries.
Pakistani refineries produce zero-euro quality oil whereas Indian refineries produce Euro-3 and Euro-4 quality oil, which is cleaner and more environmentally friendly fuel. Pakistan is still preparing a road map to introduce Euro-2, Euro-3 and Euro-4 for clean energy in the country.
“Pakistani refineries have been tasked to produce-Euro-2 quality diesel till July 2014 and therefore the government wants to shelve the plan of oil trade with India till then,” official said adding that the other reason is Pakistan has penned an oil supply contract with Kuwait Petroleum Corporation (KPC) till 2014.
An official of the Engineering Development Board (EDB) said that the use of Euro-3 and Euro-4 would cause technology shift and therefore it would be difficult to run existing vehicles on fuel produced in India.
“Different specifications of petroleum products have barred the countries to reach any agreement,” a senior government official said. Pakistan, during talks held in New Delhi in the second week of July, had asked Indian refineries to change specifications to meet requirements of Independent Power Producers (IPPs) operating in Pakistan but they refused to do so.
“We have long-term agreements of supplying oil with certain specifications to IPPs,” the official said.
The other stumbling block is the high cost of transportation due to long distance. Indian refineries that produce furnace oil are located in the south of the country and cater markets of Sri Lanka and Singapore.
In case petrol and diesel, Indian refineries are producing Euro-3 compliant fuel for remote areas of the country whereas Euro-4 quality fuel is being supplied to big cities like New Delhi, Mumbai and Kolkata. These fuels are most environmentally friendly whereas Pakistani refineries except Pak-Arab Refinery Limited (Parco) are producing low quality petrol and diesel.
On the other hand, Pakistan is using better quality furnace oil with 3.5% sulphur content while neighbours produce furnace oil with sulphur content ranging between 4% and 4.5%.
Pakistani refineries collected over Rs150 billion from consumers in the last several years under a special tax deemed duty. The amount was supposed to be used for upgrading plants to produce Euro compliant fuel but oil refineries except Parco failed to do so. Refineries are now demanding permission to charge more in order to collect $1 billion from consumers to upgrade plants to produce Euro-2 compliant petroleum products.
The other reason is that Pakistan plans to meet only 20% to 25% of its needs for petroleum products from India to avoid overreliance on the old rival due to security concerns. “We will continue to import oil from Kuwait and other Gulf countries in a bid to ensure secured supplies,” a government official said.
Published in The Express Tribune, September 4th, 2012.
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