ISLAMABAD: The government is likely to scrap deemed duty on the sale of high-speed diesel and introduce refinery margins for oil refineries in the new proposed Pakistan Oil Refining and Marketing Policy 2019.
The government is working on the new policy under which some changes are being proposed in arrangements for the refineries.
At present, the oil refineries are collecting deemed duty on the sale of high-speed diesel (HSD) to consumers. The duty was introduced in 2002 when the refineries were asked to upgrade their plants by utilising the collection. However, the refineries are still unable to compete with counterparts around the world.
“Current deemed duty of 7.5% on high-speed diesel may be discontinued and instead refinery margins may be introduced. Fifty per cent of OMC (oil marketing company) margins on HSD and motor spirit (petrol) are being worked out on the basis of annual Consumer Price Index (CPI) reading,” a senior government official told The Express Tribune while quoting new policy proposals.
At present, the import parity price is calculated on the basis of average free-on-board RON 92 petrol prices of the previous period plus the actual tender premium, freight and incidentals. However, the ocean losses, included in the cost of last cargo imported by Pakistan State Oil (PSO), have not been made part of the oil pricing formula.
In the new policy, the Petroleum Division has proposed that the import price formula in case of petrol and high-speed diesel may also include ocean losses plus the weighted average of actual tender premium, freight and incidental of PSO cargoes from the last importing period.
Fortnightly price revision
In order to avoid time lag, the determination of petroleum product prices will shift to fortnightly basis in a phased manner in consultation with the stakeholders.
Subject to applicable regulations of the State Bank of Pakistan (SBP) and meeting all formalities, the refineries will be allowed to open and maintain foreign currency accounts and keep export proceeds there in order to meet operational and emergency requirements.
Relevant foreign currency rate will be applied to the import parity price so as to fully recover the actual cost incurred on the import of crude oil and petroleum products by importing refineries and oil marketing companies (OMCs) including all duties and incidental expenses. Any gains or losses due to delay in SBP’s approval to OMCs and refineries because of movement in foreign exchange rates will be adjusted in the following period’s price.
Published in The Express Tribune, July 27th, 2019.