ECC likely to abolish freight equalisation margin


Express June 15, 2010

The next ECC meeting will likely abolish inland freight equalisation margin, a component which keeps oil prices the same throughout the country, according to an analyst.

The other decision Economic Coordination Committee (ECC) will take is reduction of purified terephthalic acid (PTA) duty and import duties of completely knocked down (parts) kits for the automobile sector.

The decision will affect the oil and gas, chemicals and automobile sectors.

Concern for OMCs

Oil prices will likely be Rs0.2-2.5 per litre cheaper in southern parts of the country than northern regions if the inland freight equalisation margin (IFEM) is removed.

“It will be a setback for all OMCs (oil marketing companies) except for APL,” said  Topline Securities analyst Farhan Mahmood. in his research report.

Attock Petroleum Limited (APL) will be the only major beneficiary as it has refineries both in northern (Attock Refinery) and southern (National Refinery) regions, said the analyst.

The meeting will also decide if OMCs will be charged with higher turnover tax of one per cent or not. It is expected the government will exempt OMCs from higher turnover tax, the analyst said.

Chemicals: PTA duty

The issue pertaining to purified terephthalic acid (PTA) duty and pricing structure will also be discussed.

The ECC is expected to reduce current PTA duty of 7.5 per cent to 3-5 per cent, said the analyst.

Automobile: duties on CKDs

The budget remained silent on import duties of completely knocked down (CKD) kits under Auto Industry Development Plan. According to this plan, some high-tech parts should have been localised by fiscal year 2010.

No relaxation would mean that car assemblers will be charged with higher import duties on those parts which should have been localised this year.

Published in the Express Tribune, June 15th, 2010.

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