CCOE gives approval for refinery policy

Raises questions regarding upfront tariff incentives, directs ministry to review


Zafar Bhutta September 14, 2021
A general view shows an oil refinery. PHOTO: REUTERS

ISLAMABAD:

The Cabinet Committee on Energy (CCOE) on Monday approved the Pakistan Oil Refinery Policy 2021 in principle.

However, it raised the question in upfront tariff incentive and directed the Petroleum Division to revisit the upfront incentive package offered to the existing refineries in the country.

The CCOE was held under the chairmanship of Federal Minister for Planning, Development and Special Initiatives Asad Umar on Monday.

The Petroleum Division presented a summary of Pakistan Oil Refinery Policy 2021 for approval of the cabinet committee. The proposed policy was discussed in detail.

The committee chairman appreciated the work and efforts of the Petroleum Division and highly knowledgeable and experience professional involved in the formation of this policy.

Sources told The Express Tribune that Umar raised questions over upfront tariff incentives.

He said that he was not going to approve upfront tariff for CCOE.

CCOE members also raised questions over the collection of deemed duty by existing refineries. They questioned how much money they collected and where it was spent.

Sources said that the Petroleum Division also presented a break up of collection of deemed duty by oil refineries during the last several years that stood at over Rs200 billion.

However, the Petroleum Division said that refineries had invested all money all their upgradation projects.

Officials further said that CCOE was also of the view that refineries were operating in the private sector. If the government allows incentives to these refineries, the other sector would also start coming to the government to seek such tariff incentives.

The cabinet body is also likely to approve 10% protection for existing refineries to execute the upgradation projects.

It had raised some objections on the upfront tariff, deemed duty collection and its use, mechanism of incremental revenue.

Umar had raised question on the upfront tariff proposed for refineries in new policy 2021. The Petroleum Division had addressed the concerns in a response submitted to the cabinet body on energy.

The Petroleum Division said that the government would contribute 25-30% in incremental revenue for upgradation projects whereas the remaining amount would be borne by refineries.

Moreover, the Petroleum Division said that government would seek Rs500 million guarantees from refineries and would pay from incremental accounts from projects after award of contracts.

Officials of The Petroleum Division said that CCOE had approved 99% of the policy. However, it sought further clarification on the proposed 10% tariff incentives for the existing refineries to install up-gradation projects.

IPPs payment

The government had struck a deal with independent power producers (IPPs) to revise rate of return and capacity payments.

Under this deal, the government had paid Rs89.2 billion to 20 IPPs as first instalment.

However, it had withheld payment to 12 IPPs under the National Accountability Bureau (NAB). The anti-corruption watch dog had been investigating the corruption case against Nishat Chunian Power Ltd.

Earlier, the CCOE had approved recovery of Rs8.36 billion from Nishat Chunian Power Ltd and renegotiating the deal with IPPs under Power Policy 2002. However, the CCOE directed the Power Division to clear payment of 11 IPPs except the company, which is facing NAB case.

The Power Division submitted a report of the Implementation Committee on the ratification of the IPPs Agreement, under the 2002 Power Policy.

After a detailed discussion, the committee approved the final report of the Implementation Committee and directed the Power Division to proceed with the payments of all 11 IPPs as per the signed agreement except a company whose cases are under investigation at NAB.

Incentives for electricity consumers in winter

The CCOE also approved an incentive package for electricity consumers in winter season.

Published in The Express Tribune, September 14th, 2021.

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