Refineries collect Rs500b in name of deemed duty

Published: September 1, 2018
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During the meeting, it was highlighted that the NAB was conducting an investigation into a long-term liquefied natural gas (LNG) supply deal with Qatar. PHOTO: FILE

During the meeting, it was highlighted that the NAB was conducting an investigation into a long-term liquefied natural gas (LNG) supply deal with Qatar. PHOTO: FILE

ISLAMABAD: Oil refineries have pocketed Rs500 billion from consumers on account of deemed duty, an incentive provided by the government for upgrading their plants in an effort to produce higher-grade and environment-friendly fuel.

The disclosure was made on Friday in a meeting of the Senate Standing Committee on Petroleum, chaired by Senator Mohsin Aziz.

Refineries have been collecting deemed duty on the sale of petroleum products since 2002 to install upgraded plants for oil refining. So far, they have got four extensions in the deadline for upgrading the plants, but are still receiving the duty.

At present, 7.5% deemed duty is being collected on the sale of high-speed diesel to the consumers.

According to a decision of the Economic Coordination Committee (ECC) taken in March 2013, the refineries, including National Refinery Limited, Pakistan Refinery Limited and Attock Refinery Limited, were required to deposit their profits above 50% of the paid-up capital including the accumulated unutilised balance in a special reserve account.

However, instead of shifting funds to an escrow account, they spent the special reserves on upgrading the refineries.

The Senate committee chairman voiced concern over what he called undue protection provided by the government to the refineries and wanted to know where the money was spent.

He emphasised that the deemed duty was aimed at upgrading the quality of petroleum products, but regretted that hefty collections were made from poor oil consumers. “Public money should be spent on people,” he said.

The petroleum secretary said they were going to address those problems which remained unaddressed over the past one decade. He stressed that they would bring about improvement in oil and gas exploration activities in Balochistan in the next six months.

“A task force is being set up to address the challenges standing in the way of oil and gas exploration activities,” he said. “The 18th Constitution Amendment (which transfers some powers from the centre to provinces) is not being followed in true spirit.”

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Committee members agreed to review oil and gas exploration work on a semi-annual basis and the exploration blocks awarded to local and foreign companies in Balochistan.

Senator Mir Kabir said mineral resources were being tapped, but the provincial government of Balochistan was not receiving its due share. He lamented that the province was given a mere 2% share in the Saindak project, but even that revenue share was not being released.

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LNG deal with Qatar

During the meeting, it was highlighted that the National Accountability Bureau (NAB) was conducting an investigation into a long-term liquefied natural gas (LNG) supply deal with Qatar.

Aziz was of the view that there was nothing in the LNG deal to keep it secret. “Why was the deal struck for 15 years,” he asked.

Pakistan State Oil (PSO) officials explained that under the deal, the two countries were bound not to disclose contents of the agreement, adding such agreements of sale and purchase were kept secret at the international level as well.

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The committee chairman pointed out that the hired consultant had not recommended the signing of the 15-year LNG deal with Qatar. The body recommended sending the LNG deal to NAB for a thorough probe. Senators also expressed concern over the presence of a PSO official who was sacked on corruption charges.

Published in The Express Tribune, September 1st, 2018.

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